As I have written many times, a major source of the harm inherent in the finance sector today, is that its product pushers are allowed to be marketed as advisers to a vulnerable public. The effects are routinely devastating for individuals, and as we have seen writ large since 2008, destabilizing for society as a whole.
Today after 6 years of officially sanctioned mania to push savings farther and farther out the risk curve, the world is poised perfectly to meet financial demise once more. Whether it be towers of empty condos with negative cash flow and understated ‘vacancy rates’, see: The vacant truth about rental condos, or heinously valued dividend-paying securities with crushing capital prospects–sitting ducks are far and wide.
Not content with just gouging outrageous profits by incinerating client savings, many financial ‘advisory’ firms are pushing ‘investment’ loans as the very life-blood of their business model. Whether it be extracting equity loans from homes or borrowing against current portfolios via margin loans, the rage of the day proclaims that “rates are attractive”. Of course, the attraction is for the product pushers, not their customers. See this nauseating update for further insight: Disgusted Wells Fargo Advisor: what hasn’t been said about securities-based lending.
A Wells Fargo source had this to say, “you would think that the firm did a pretty good job of staying out of trouble when the last crisis nearly destroyed many of its rivals. Yet they keep upping the ante in this area (securities based lending). Not only are there required referrals built into the grid now but there are also built in penalties that nobody has talked about. That seems to be the very definition of ‘product placement’. To be penalized for not making lending referrals has to be an eye opener…
A second Wells Fargo source was more animated regarding the policy and described the loan incentives…Pushing clients to lever up 60-70 percent or more at the top of the market is the real crime. They are mostly using that money in the same way homeowners levered up their homes with HELOCS. We all know how that turned out. In fact many places market them using that terminology. It’s the same at Yodas favorite shop (UBS) as it is anywhere else. And it’s all about firm profits not client interest. I also laugh out loud when I see an article about banks pushing cards. At one shop you could have earned a super bowl ticket or a trip if you opened enough credit card accounts. A sales assistant can get $100 for each SBL.
Unfortunately this story is not just about Well Fargo, or UBS, but about the mindset and tactics common throughout the financial sector. The consequences cost all of us.