The Wealth Consigliere

How much is Smith Barney worth, and why should advisors and their clients care? If Smith Barney-parent Citigroup and acquirer Morgan Stanley can’t reconcile a roughly $15 billion disagreement about price, advisors and their clients are likely to experience the fallout in the form of smaller recruiting checks and/or a less satisfying client experience. A Strategic Business, Convoluted Valuation Process It’s ironic that the retail brokerage made famous by commercials from the curmudgeonly John Houseman, “Smith Barney – they make money the old-fashioned way,” is caught up in an old-fashioned valuation dispute that may have significant adverse consequences. The price that Morgan Stanley will pay for 14% of Smith Barney will be established by what can only be described as a byzantine process.  The first step was for Citigroup to declare a selling price for Smith Barney. The Citi number came in at $24 billion for 14% of the brokerage.  Morgan Stanley then...

The two big news events of the past week – the discovery of the Higgs boson and the mushrooming LIBOR scandal – can be difficult to comprehend. But both can teach us something timeless about effective problem-solving and establishing trust. Higgs boson, often described as the “God” particle, was revealed after researchers spent decades searching for this elusive secret to the universe. When the Higgs boson announcement was made last week, two teams independently verified the results. This amazing discovery was the product of the scientific method . The intellectual rigor of this investigation by the world’s brightest minds confirmed what was true for billions of years. Thankfully the laws of the universe were the final arbiter of truth not the SEC, FINRA or the FSA. Fudging The Rules For Gain Now compare that problem-solving approach to the recent modus operandi in the financial services industry around setting the LIBOR rate. In the LIBOR scandal, insider...