Updated Monday, August 31, 2015 as of 9:57 PM ET

A New Wealth Management Industry Mandate

Clients are mad as hell, and they're not going to take it anymore—unless the industry makes some changes. Speaking at the SIFMA Private Client Conference in Chicago recently, a chorus of executives including Stifel Chairman and CEO Ron Kruszewski, Merrill Lynch Wealth Management Head John Thiel and UBS Head of Wealth Management and Investment Solutions Robert Mulholland called for tougher industry standards.

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Comments (2)
These executives made some good points; however, they all left of the most important thing that at the heart of why so many clients have had negative experiences with some advisors: executive compensation. The old adage "everything starts at the top" holds true. Large compensation bonuses to executives for firm out performance distorts the firm's approach to clients. It results in a "the end justifies the means" culture. There are plenty of examples (see JP Morgan) where execs are applying pressure on advisors to promote more profitable proprietary products. They also place overly ambitious production goals (or GDC requirements) on advisors; then unceremoniously dumps the advisor who misses the target and pushes the clients off on an already overloaded "top producer". These execs are far removed from the client-advisor relationship. As long as the suitability paper work looks good, what's good for the company is good for the client. They don't have to sit face-to-face with the client and try to explain why they are putting the client in poorly performing proprietary products. They don't have to ignore the existing client or the suddenly "smaller" client in order to pursue the elephant that will help them reach their production goal. But the advisor does. I guess I am the only person on the planet who sees the flaws in all of this.
Posted by ATL6245 | Friday, June 14 2013 at 2:13PM ET
The fact that the heads of ML, UBS and other firms are having this conversation in 2013 is truly pathetic. Where have they been and what have they been doing for the past decade or two?

Dan Ariely, who spoke at IMCA's spring conference this year, offers one possible explanation --

"You can't help but having your motivation influence how you see reality."
Posted by Steve S | Thursday, June 27 2013 at 8:53PM ET
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