VP Investments John F. Henek

VP Investments, John F. Henek

John F. Henek
Financial Planner
Tel: 708-267-0627

Some of you many have seen Martin Scorsese’s “The Wolf of Wall Street” over the holidays.  In the movie, Leonardo DiCaprio makes a fortune by charging his customers up to 50% commissions on buying and selling penny stocks.  While many think this behavior is a thing of the past, many of the Wall Street wolves now dress in sheep’s clothing!  Most big names that you have heard of touted as “Investment Advisors” really are brokers in disguise.  What this means is that your broker dressed as a Financial Advisor could be eating your returns through commissions, unnecessary fees, poor mutual funds or individually managed account choices that eat into investor returns over the long run.

It’s easy to fall prey to the huge, well known brokerage institutions especially given the millions in marketing dollars they spend to make you believe they are working for you. Their continuous TV commercials and print ads are inspiring and full of comforting themes about stability, trust and expertise in investments and financial planning. Ironically, it was these very same brokerage institutions that needed a bailout from the Federal government in 2008 and are subject to millions in class action lawsuits from selling unsuitable investments to their clients.  Most investor’s don’t realize that brokers are rewarded for putting you in Mutual Funds that will pay them higher commissions either through hidden fund loads or trailing commissions. The same goes for individually managed accounts, variable annuities and various private Real Estate Investment Trusts where the commissions can be as high as 8% of the initial investment. In certain circumstance I have seen commission as high as 16%.

Our advice is to work with a Registered Investment Advisor (RIA) that does not collect commissions from the investments proposed or from trading transactions, is not affiliated with a Brokerage Firm, and instead uses a 3rd party Custodian Bank (like TD Ameritrade) to hold your investments. Most fee-only, non-commission advisors are more likely to propose low-fee funds given that they do not receive commissions. Additionally, RIAs are Fiduciaries and need to put their client’s interest first before their own (unlike brokers).  Over time and due to compounding, a 1-2% additional fee can add up to hundreds of thousands of dollars that end up in someone else’s pocket from your IRA or retirement account.

I recently read a great article (ironically) from Investment Advisor magazine.  The editor quoted a well-known reformist in the financial industry as saying that every client should get their advisor to sign a “mom and pop fiduciary oath”.  I agree!  What’s the oath?  It’s simple:

“I believe in placing my clients’ best interests first.  Therefore, I am proud to commit to the following five fiduciary principles:

1. I will always put my client’s interests first.
2. I will act with prudence; that is, with the skill, care, diligence, and good judgement of a professional.
3. I will not mislead clients, and I will provide conspicuous, full and fair disclosure of all charged fees and important facts.
4. I will avoid conflicts of interest.
5. I will fully disclose and fairly manage, in my client’s favor, any unavoidable conflicts.

Get your current Financial Advisor to sign this oath.  If they won’t or can’t, run, don’t walk to a Registered Investment Advisor or fiduciary that will.

Best Regards,

John Henek
QCI Inc.