August 30, 2010
My complaint in this regard is yes, a lot more oversight is needed for all 3 groups. Investment advisors who try to avoid the claim they are not brokers but in fact really are brokers, and true brokers as well, will overlap their responsibility in terms of providing the client/ private investor with advice. The advice is self serving for the investment advisor who cares far less about making gains for his client than for positioning himself for rebates or kickbacks from the stock issuer/mutual find company.
I have used Compak Asset Management located in Orange County, CA who touted themselves as being investment advisors but in fact are a broker. They lost me 80 thousand dollars over several months in terms of lost mutual fund gains in 2008 because they would not follow their own publicized (radio program) claims of preserving gains and not losing what monetary gains were made in the markets.
Under the guise of offering related services such as personal investment advice (basically just soliciting more money to be invested with them) and other services such as life insurance and long term health insurance, they hide the fact that they make investments for their clients without attempting to preserve the financial gains of the client, and demonstrate that they have no obligation to protect the financial assets of their client.
I experienced that they maintained their same mutual accounts through massive moves of the stock market, up and down, knowing that they have financial gains to be made from the mutual fund companies by not trading in and out of the funds, i,e they could care less about improving or maintaining gains for their clients as long as they continue to get their commissions and the mutual fund rebates.
Thus the client suffers from the investment advisor getting to keep their 2% commission as well as the mutual fund company incentives to "stick with them" and get rebates or kickbacks depending on how much turnover in the mutual fund's stocks is experienced. Obviously within that context, the broker will invest in mutual funds for the client based on which mutual fund gives them a larger rebate, and will not readily sell unless the client forces the advisor to do so.
Yes, much more regulation is needed over brokers and investment advisors !
Jeremy V. Laughlin