The Financial Services Industry Needs to Stop Bullying Its Customers.

We can all remember a time during our formative years when a bully used their position, power or sheer physical presence to push around someone who seemed like an easy target.
At 5'1" my sophomore year of high school, I was the short fat kid who wanted to “change the world” — not a popular thought at that stage of life. Although wrapped in a temporarily small package (I am now 6'7"), I was fiercely protective of anyone who was suffering under the tyranny of these kind of kids.  
The nose guard of our football team was one such buffoon. He was 6'2" and almost 300 pounds. During lunch one afternoon, I witnessed him pouring chocolate milk over the head of my helpless friend while he laughed to the applause of his band of letterman-jacket cronies. Without missing a beat, I got in his face. After a barrage of colorful language that caught him by surprise, I threw the hardest punch I could and ran like hell. Unfortunately, I wasn’t very fast!


Decades later, I still do not tolerate bullies. The bullies of the financial services industry are those who extract as much value for themselves to the detriment of others. I don’t think there is an educated person in America who doesn’t think that the system feels set up for those in the know. The rest are left out in the cold.
In 2008, while watching many of my friends and clients lose half of their nest egg to the market crash and real estate crises, it struck a deep chord. Having grown up with very little, I was reminded of the pain. These weren’t just statistics to me. I was reminded of nights where my own family went with little or no food. That fearless high school kid in me was kicked into gear. I knew I had to take action.

For decades now, I have been blessed with the incredible gift of “access.” Access to some of the most brilliant minds and peak performers in their own fields.

I’ve had the privilege of coaching Paul Tudor Jones, one of the top 10 traders in financial history, for 22 straight years now. He hasn’t lost money in any of those 22 years. As his coach, I have been inside the ropes, and what I have learned from him has been invaluable to my own situation.
In early 2009, I thought, what if I sit down and get 50 of the top financial minds, from Carl Icahn to Ray Dalio to Warren Buffett to Vanguard Founder Jack Bogle… and more? I wanted them to share their own perspective, and I asked them, “Is the game still winnable for the average person?” Even in a world where 70% of the daily trades are made in microseconds by supercomputers.   



One of the foundational lessons to becoming the chess player is to find a highly qualified advisor who doesn’t have conflicts of interest. It’s common sense that’s not so common. You wouldn’t believe the level of abuse and the lengths the major firms go to in order to mask these conflicts in the multi-trillion industry of wealth management.
I have educated millions of people now on the difference between a fiduciary (also called a registered investment advisor, or RIA for short) and a broker. A broker sells and receives compensation for products or funds, while a fiduciary is required by law to put your interests first. I am a firm believer that the advice you receive should be separated from the products or funds you buy. Would you go to a doctor who manufactured and sold his own medicine? Of course not!  But the vast majority of the financial industry isn’t legally obligated to put your interests first like a doctor. You heard me right. Well over 90% of financial advisors in this industry are brokers. They don’t call themselves brokers, of course. Their titles are financial advisors, wealth managers, etc.
The vast majority of people I meet, both the sophisticated and unsophisticated, are still unaware of the difference, or they wrongfully assume their advisor is a fiduciary (hint: nearly all name-brand firms are brokers in disguise). If your financial advisor is with a firm that has their name on a sports stadium, blimp or race car, there is a high probability that they are a broker. They are master marketers, and they make it feel or sound like they are giving unbiased advice, but we would be naïve to think that their own pockets aren’t the priority.




To be sure, many advisors are wonderful and committed people who truly believe they are doing what’s best. This is by no means an assault on their character or good intentions. But one can be sincere and sincerely wrong. Most advisors are trained by and work in a system that is hardwired to make money for the “house” and reward those who produce sales. Compensation drives behavior, so they certainly don’t wake up each day seeing the conflicts as an issue. As Upton Sinclair famously said, ‘It’s hard to get a man to understand something when his salary depends on him not understanding it.”
Over the past couple years I went on countless talk shows, radio shows, wrote articles and created videos, all with the intent of educating Americans on the damage caused by this broken model where the person you trust with your financial future is rewarded for selling high-commission products, proprietary funds, while layers of hidden fees go unnoticed.

And although we’ve come a long way in sharing the truth, I’ve recently learned we have a new problem. And it’s even worse!

Nearly a year after the first edition of my book was released, I was introduced to Peter Mallouk — an impressive guy, even by my standards. He is, by all accounts, the epitome of excellence in the wealth management world. Peter and his firm, Creative Planning, manage nearly $20 billion in assets and carry a number of prestigious accolades — including being the only wealth manager in history to have been ranked #1 Independent Financial Advisor in America by Barron’s three years in a row. And they are also now ranked the #1 Wealth Management Firm in America by CNBC for the second consecutive year. It’s great to see a true fiduciary topping the charts. Creative Planning’s typical client is the millionaire next door, but they also have an elite group that works the ultra-wealthy ($10 million or more).
Peter and his team, with a little arm twisting from me, recently went from serving only higher net worth folks to opening up a new division to accept smaller accounts. His team will provide a complimentary second opinion to anyone and help them uncover the layers of conflicts, hidden fees and proprietary funds in their current scenario. A free second opinion from the #1-ranked firm is a no brainer.  (www.TheNumberOneFirm.com)
Peter had asked for a meeting with me, knowing my passion for protecting clients and my commitment to real and absolute transparency in the personal financial sector. What he shared with me left me completely disheartened.
After years of trying to educate millions of people on the difference between a broker and a fiduciary and stressing the need for a fiduciary standard, Peter showed me a mountain of evidence that many “fiduciaries” were exploiting a legal loophole to make additional revenue off unsuspecting clients.
How so? It turns out that fiduciaries can moonlight as a broker when it suits their pocket book. You heard me right. Somehow, regulators will allow advisors to be both a fiduciary and a broker through a process called “dual registration.” One foot in both camps. Talk about a wolf in sheep’s clothing. That’s like sitting in your doctor’s office and after diagnosing you, he prescribes you a medication that he mixes up in the backroom and sells at a profit! We would never accept such a conflict!
“It gets worse, Tony!” Peter carried on…
“Some fiduciary advisors are actually receiving additional fees and kickbacks for directing people to specific funds under the guise of 'shareholder services fees' or 'consulting fees.' Or, in some cases, they have been so brazen as to sell proprietary products under different names where they made more money for recommending an inferior product!  And although disclosed in fine print, the client is unsuspecting.”  

I was dumbfounded and disheartened, but I also know that we must empower people with knowledge they need to avoid these land mines. 

There are lots of high quality firms out there, so I asked Peter to give people the criteria they need to first discover if they are working with a broker or not, and then how to make sure the fiduciary you select is operating solely in your best interests...

1. Aside from making sure that the firm is registered with the SEC as a registered investment advisor, the most important criteria is to make sure that that person/firm is not affiliated with a broker dealer (and ask for it in writing.) This is the “dual registration” I explained above. (Tip: If the advisors website or email says “Securities offered through […],” you are dealing with a broker.)
2. Make sure your advisor does not offer any proprietary funds. Some firms create their own products/funds to increase revenues and then put those products in their client’s portfolios. In other words, you may be paying a firm to advise you to buy their own products! If you are paying for investment advice, you deserve to expect that the advisor is selling you investments as well.
3. Make sure the registered investment advisor is compensated based on a percentage of your assets under management — and never more than 1.25% in annual advisory fees for comprehensive financial planning. Preferably this number should be 1% or even less if you have substantial assets to invest. Be sure there are no “12b-1” fees, shareholder service fees, consulting fees or other “pay-to-play” fees.
4. Make sure the registered investment advisor is not compensated for trading stocks or bonds. If you are a bond investor, the most flagrant fouls in this industry are the “markups” charged by the broker and the firm. (Tip: If your advisor says you pay no fees on your bond portfolio, beware! Ask specifically if any bonds are “marked up.”)
5. Don’t just give an advisor your funds directly. You want to make sure that your money is held with a reputable third-party custodian, such as Schwab, TD Ameritrade or Fidelity, which offers you 24/7 online account access sends monthly statements directly to you. (Note: A fiduciary using a firm like ones named above to custody your investments is NOT the same as the retail branch of these firms.)
6. When looking at an advisory firm, be sure the firm has educated and credentialed advisors on board. When you go to a doctor, you want to make sure they have the M.D. credentials to back it up. The Certified Financial Planner designation, CPAs and attorneys are all good qualifications to have on your financial team.

Since penning this article, I have decided to align myself with Creative Planning by becoming a board member and Chief of Investor Psychology. My mission is to help people from making poor emotional decisions during volatile times and help them connect to their core purpose so that they will take control of this area of life.      



After all, we aren’t really after “money” per se. We are after the emotion that money gives us. Freedom, security, comfort, contentment, or whatever it is for you. But what if we could tap into the emotion we really want, so that we enjoy the journey to financial freedom and not wait “until” before we give ourselves permission to have an extraordinary life.
Live Strong and Live with Passion!