TEXT OF STORY
TESS VIGELAND: So we’ve just dealt with the question of whether it’s worth jumping from one giant brokerage to another. But what if you didn’t use one of the big boys at all? Plenty of smaller, independent brokers want your business. And many of them are newly independent, part of the mass layoffs hitting Wall Street. That gives consumers more choice. But before you make a switch, listen to what Marketplace’s Bob Moon has to say.
Bob Moon: So what do you think? Do you still prefer taking your investment advice from one of those big-name brokerage houses? Or has the recent financial meltdown pushed you into the arms of a smaller firm or independent broker promising to give more loving care to your tender?
Julia Alliger is a United Methodist minister in Hurdle Mills, N.C. She told us she’s feeling less inclined to invest her money with one of those big-name firms.
Julia Alliger: Those are kind of those faceless places where my money, which is not much, can just get completely lost.
Alliger says the simple way to avoid those toxic investments we’ve all heard so much about lately is keeping things simple.
Alliger: At a local level, I can actually ask somebody about that, and I can have a conversation about, ‘Tell me why I should feel secure about my money being here?’
Maybe so, but then we dialed up listener Greg Ellison on the other side of the country — in Colbert, Wash. And the computer software consultant wasn’t so sure that smaller is really better.
Greg Ellison: I think my concern would be the other way. I would want to keep my investments with a company that I feel has the resources to recover from a loss. To be of a size that, if they’re in trouble, that there’s an ‘Uncle Somebody-Or-Other’ that’ll bail them out.
Ah yes, as we’ve all seen lately, there’s nothing like the security that a “rich uncle” can provide, especially one named “Sam.”
But independent advisor Robert Pagliarini points out you’ll still be entrusting your money to the very corporations that got us into the mess we’re in. He says he’s hearing from customers who’ve come to that same conclusion.
Robert Pagliarini: One client said, ‘Listen, if I’m going to hire a personal trainer, I don’t want one who’s out of shape.’ Another client said, ‘It’s very hypocritical that these big names want to manage my money, but can’t manage their own money.
The financial Goliaths say they aren’t seeing any mass exodus of either brokers or clients. But Pagliarini, who writes extensively on individual investing, says he’s noticed many more brokers hanging out their own shingle.
Pagliarini says investors who want conflict-free advice should stick to independent advisors who follow the rules of Certified Financial Planners.
Pagliarini: You don’t have to sell things on commission. You don’t have your own products. We go out into the market and we look at those investments that are the best for the client.
Now, mind you, we didn’t find any brokers who said they were forced into selling investment products that their customers should never have touched. But some clearly felt, shall we say, some pressure. In Fort Myers, Fla., Nadine Wilkes recently left the financial giant UBS to go independent.
Nadine Wilkes: You know, I wasn’t forced to place my clients in products. Don’t get me wrong. But I just didn’t like the direction that the firm was headed.
That’s not to say she didn’t see benefits in being with a brokerage powerhouse.
Wilkes: The size allows the firm to bring products to market that maybe a smaller firm would not be able to do.
But those differences have been narrowing fast, according to industry consultant Howard Diamond. He told us from his New Jersey office that the smaller outfits and independents offer pretty much the same scale of services and products as their corporate rivals.
Howard Diamond: You might have access to maybe some sexy IPOs you wouldn’t get in a different firm. But, by and large, you know, there’s, I use the word homogenization, because there really is not a huge difference. Firms are really able to offer products, you know, across the board that years gone by they weren’t able to do.
That leveling of the playing field has allowed many brokers who’ve gone independent to move many of their longtime clients right along with them. But independent advisor Nadine Wilkes cautions that it’s not always the best idea.
Wilkes: There are some clients you don’t want to bring, because it’s too expensive. They’re smaller accounts and perhaps they have something that’s not easily transferable, and you find out it’s just not worth it for them to transfer, the fees.
Despite those kinds of roadblocks, though, a sizeable chunk of business has slipped away from the major brokerages. Paul Weinstein recently joined Wilkes in their new independent partnership. He says those once-esteemed institutions aren’t just up against new competition; they face a long and difficult struggle to win back customers who want trustworthy investment advice.
Paul Weinstein: I think it could take quite a while, really, before that confidence is repaired. First and foremost is they have to get their financial houses in order.
In Los Angeles, I’m Bob Moon for Marketplace Money.
News and information you need, from a source you trust.
In a world where it’s easier to find disinformation than real information, trustworthy journalism is critical to our democracy and our everyday lives. And you rely on Marketplace to be that objective, credible source, each and every day.
This vital work isn’t possible without you. Marketplace is sustained by our community of Investors—listeners, readers, and donors like you who believe that a free press is essential – and worth supporting.