The Wealth Consigliere

The ongoing saga about J.P. Morgan’s  multi-billion trading loss  involving the “London whale” reminds me of a timeless story – the parable of Jonah and another whale in about 750 B.C. As the legend goes, Jonah found it difficult to convince people to live the virtuous life, despite being held up as an example.  To pay for his failure, he was tossed out of his boat one day and was swallowed by a whale. After spending three days in the belly of the beast, he repented and promised to try again. The whale then spit him out. J.P. Morgan’s trading blunder involved a different kind of whale – the so-called London whale. Since then, the London whale’s mammoth trading loss has engulfed an institution previously thought to be exemplary in risk management. The fallout has reignited the debate about proprietary trading, the Volcker Rule and too-big-to-fail. The modern and ancient storylines are similar, but it’s an open question how J.P. Morgan will re-emerge fr...

Large Wall Street firms have tossed independent advisors yet another great opportunity.  Recently, management at many of the wirehouses informed their financial advisors that they wouldn’t get paid on accounts with a balance of less than $250,000. These clients are being shipped off to a call center because, in so many words, they can’t be profitably serviced by a “full service” financial advisor.  This decision is a frank admission that the cost structure at big firms is still too high. Large firms in the Dodd-Frank era are feeling the squeeze. The result is predictable: Wall Street again put self-preservation ahead of advisors and clients.  Is that any way to treat people, let alone someone who may become a worthy client one day? The opposite is also true: Aren’t these big firms really saying that if you have enough money, we will love you? Short-Term Thinking This bloodless view of the world is not particularly nice, nor is it necessarily good business prac...

  It’s not easy being Best Buy these days. Price competition is intense, and pressure is coming from all directions. Online competitors, without costly overhead, are selling the same products cheaper. Tech-savvy consumers are comparison shopping right on the showroom floor, using mobile phones and the  RedLaser app  to scan for the best price. Instantly, a consumer can get a list of better deals on a flat screen TV or Blu-ray player from online retailers and even nearby stores. Wealth advisors are facing the same challenges from online “firms” like  Wealthfront  and from other advisors who are willing to cut their fees to win business. The Opportunity in Solving Problems But all is not lost for advisors or retailers if they heed the lesson from one of Best Buy’s more successful innovations:  The Geek Squad . The Geek Squad delivers what most low-priced product sellers don’t: Expertise to make everything work together. Anyone who has ever tr...