Research continues to show individual investors are confused by the titles used by investment professionals and cannot distinguish between investment advisers and brokers. In a recent paper in the Financial Analyst Journal, the authors shared their survey results which demonstrate the difficulty investors have in discerning which professionals must act in the best interests of their clients (i.e. a FIDUCIARY).
Unfortunately, it is the financial industry itself (or rather the banks within) that perpetuate the confusion. Lobbying efforts from the brokerage world (whose advice is held to a lower...
One of the more powerful rules enacted after the last financial crisis enables insiders of companies to step forward to identify possible fraud. Almost a year ago to the day, we documented the award to those helping to incriminate Merrill Lynch (Bank of America), today it is JP Morgan Chase. The U.S. Securities and Exchange Commission awarded a total of $50 million to a pair of whistle-blowers who provided information that helped the agency win a $267 million settlement in 2015 with JPMorgan Chase over claims that the bank failed to inform wealthy clients of conflicts of interest in managing t...
The "father of indexing" and legendary founder of Vanguard, John Bogle, died this week at 89. While his passing is a loss for the investment industry, he left such a
profound impact by espousing low fees and passive investing that he will never be forgotten.
Inukshuk advisor, Geoff Gilbert, was an early disciple of Mr. Bogle (1990) and had the honor of a one-on-one meeting with him in 2013 to discuss the role advisors can play in the passive/active debate. They continued to corresponded from time to time over the following years as Mr. Bogle and his wife enjoyed the honey sent from Geoff's apia...
Earlier in 2018 Inukshuk's own Geoff Gilbert was selected and vetted by Pam Krueger to be an advisor on Wealthramp.
John Hussman is a brilliant economist. His commentaries are insightful and educational. Although he's been cautious on the markets for a while, he may have just given a prescient and timely warning for all investors. Below is just an excerpt with a link to his full commentary.
The Music Fades Out
The problem with financial bubbles is not that they are difficult to recognize, but that they can only emerge if the majority of market participants are willing to excuse or dismiss the extremes.
Intuitively, if overvaluation alone was always immediately followed by market losses, it would be impossible...
Merrill Lynch was recently fined more the $8 million for violating the anti-fraud and policies and procedures provisions of the Investment Advisers Act of 1940. In other words, the SEC found that Bank of America's Merrill failed to disclose a conflict of interest to more than 1,500 of Merrill’s retail advisory accounts who were sold approximately $575 million in products. Marc P. Berger, Director of the SEC’s New York Regional Office said that they failed to "disclose its own business interests in deciding whether certain products should remain available to investment advisory clients, Merrill...
The computer driven advisory firm known as Betterment was recently fined nearly $1/2 million for violating customer protection rules. According to the financial industy's self-regulator, Betterment benefited by using customers' free cash balances to fund a trading withdrawal program instead of providing the cash themselves. Betterment was instead able to avoid this additional interest expense and pocket the difference.
FINRA is the financial industry's self-regulating body and has a reputation for only fining members when their acts are fairly egregious. We can only hope this small penalty set...
As we have detailed here and here, there is no shortage of continued criminal activity in some of our nation's largest banks. These are not misdemeanors of the distant past, but current, and sometimes ongoing, criminal acts. Instead of increasing regulatory scrutiny, however, the very branches of government that are meant to safeguard consumers are rolling back their oversight.
In one example, the head of the Consumer Financial Protection Bureau (CFPB), Mick Mulvaney, has recently suggested shutting down a public database where people can lodge complaints against financial companies. Bureau off...
One of the more powerful rules enacted through the Dodd-Frank Act after the last financial crisis enables insiders of companies to step forward to identify possible fraud. In 2016, three Merrill Lynch (Bank of America) employees had the courage (and financial incentive) to blow the whistle on complex transactions that artificially reduced the amount of customer funds that had to be set aside in reserve accounts. This illicit activity essentially allowed Merrill Lynch to finance its own trading activities using customer funds.
The SEC won a $415 million settlement with Bank of America Merrill Ly...
It is hard to believe that most of the big banks caught in criminal activity through the financial crisis survived. Not only did they survive, but with the helping hand of the US Government bailouts, and subsequent rounds of quantitative easing, they have since thrived!
Unfortunately, many lenders that helped create the last financial crisis have continued criminal activity with little recourse from government agencies. Wells Fargo was caught last year opening millions of accounts without customer permission. And as the scandal unfolded, further evidence surfaced about the bank forcing auto-loa...
The CFA Institute* sent a letter to SEC yesterday urging three approaches to address investor confusion, enhance investor protections and limit inappropriate advising by broker-dealers. The Institute hopes the SEC will clarify that only registered investment advisers (RIAs) can provide personalized investment advice.
The CFA Institute commented that "Investors deserve to know the standard under which advice providers operate when providing them with personalized investment advice. Yet, while recognized as a problem for years, neither the SEC nor the DOL has successfully implemented a rule to ad...