November 1, 2016

Big banks make money cross selling.

Remember the last time you went to the bank? Were you asked to:

• Open a line of credit on your home (or refinance your mortgage)?
• Open a new credit card account?
• Roll over your 401k?
• Consider a “no risk” annuity for your investments?

This is not George Bailey’s bank, like in the movie It’s A Wonderful Life. You didn’t go to the bank to get investment advice. You went there to deposit a check or get money.

Banks are in the business of making money. But you might not know the bank has a legal duty, a fiduciary duty, to put shareholders’ interests before clients’ interests. According to Morningstar, Wells Fargo is one of two banks in the US that is so profitable it earns a “wide moat” status, meaning it should make more money than competitors for 20 years.

If you are a shareholder (and own the stock), then Wells Fargo is a great business.  That’s why Warren Buffet owns shares of it. He owns it because Wells Fargo is one of the best in the business at cross selling.

But Wells Fargo might not be such a great business for you as an investment client. Remember, if shareholder’s interests are first, clients’ interests are not.

Recently Wells Fargo got caught in illegal activities resulting from putting shareholders’ interests before clients’ interests. Employees secretly created millions of unauthorized bank and credit card accounts without client permission. Because they tried to meet unreasonable sales targets, 5,300 employees were fired.

Can you imagine the pressure on those employees?

Every publicly traded company is required by law to put shareholders’ interests first. So Bank of America, Raymond James, Morgan Stanley and others MUST put shareholders’ interests first.

Now imagine the lengths these companies will go to make money advising investment clients. You see, in addition to putting shareholders’ interests first there are other conflicts. Banks make money from clients, but also from mutual funds, insurance companies, and proprietary trading.

The more you learn about these conflict of interests, the more you realize it doesn’t make sense for serious investors to invest with a bank. What would it be like if you could work with an advisor who would always put your interests first?

That’s how we operate. Very simple. Global View. Working for you. Not Shareholders. Not investment companies. No cross selling. Our goal is to make you worry-free. The first piece of that is to get rid of conflicts of interest.

We are not for everyone. But if you are a serious investor it might be time to have a conversation about your money, your company’s money, or a loved one’s money.

Because savers are starved for unbiased financial advice we are offering our neighbors a free complimentary consultation to see if we can help you. To learn more, visit our website www.globalviewinv.com and contact us.