Guest post by Contributing Editor, Robert P. Seawright, Chief Investment and Information Officer for Madison Avenue Securities.
Critics of the financial services industry (often with good reason) frequently remind consumers that financial products are typically “sold” rather than “bought” and implore them not to fall into that trap. The concept here is that financial products are “sold” — pushed upon a consuming public that doesn’t understand them or perhaps even want or need them. Instead, the alleged basis for their continued vibrancy and ongoing sales is that advisors get paid big bucks to sell them. Continue reading →
JP Morgan has gotten considerable attention in the press for a recent statement that serving clients with less than $100,000 in assets is unprofitable. Not surprisingly, one response to this statement has been to frame it in terms of the message that financial institutions just want rich clients and don’t want to spend their time working with the small guy. The broader story is quite interesting and has long-term implications for both financial services firms and their clients.
Smaller customers (those with less than $100,000 in the bank) are looking less attractive as clients these days for two reasons:
1) Low interest rates mean that a bank makes less money on its deposits.
2) New regulations have capped the fees that banks can charge for a range of services.
One of the persistent themes in the investment advisory business has been Continue reading →