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Get Wise to Your Advisor: How to Reach Your Investment Goals Without Getting Ripped Off by Steven D. Lockshin

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Chapter 3

The Wall Street Whitewash

Wall Street is not the only game in town for investors. Other options include banks, asset managers such as Fidelity Investments, Vanguard, and others, and registered investment advisors (RIAs). Among these categories, there is little question that independent registered investment advisors are the least conflicted option for investors. They are typically paid in a manner that minimizes or eliminates conflicts of interest, and they are legally required to operate under a stringent standard that places clients’ interests ahead of their own. While we’ll go into more depth on independent RIAs later, let’s address the big names first.

Today, the majority of investors turn to Wall Street, a minefield full of conflicts of interest, exploitative products, and yes-men, to take care of the critical issue of their financial health. The traditional brokerage industry controls a staggering $5+ trillion of wealth from individuals, families, and institutions.

Is Wall Street concerned about its competitors? The answer has to be yes. In particular, it’s been looking over its shoulder at the growing RIA industry. Since 2004, the number of RIAs has increased by 31 percent, to nearly 21,000, according to research firm Cerulli Associates. As of 2012, RIAs now control some $1.4 trillion of assets.

But independent registered investment advisors—those not affiliated with big brokerage companies or asset-management companies—are fighting an uphill battle. Most consumers ...

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