Juggling Dynamite

In large, the world of investment sales is so conflicted, self-serving and willfully blind that it frequently doesn’t even see the problems inherent in its business model. While the marketing mantra is ‘advice that helps clients achieve their financial dreams’, the true focus is on the firm’s own operational scale, cross-selling and grabbing an ever bigger “share of wallet” from their trusting, vulnerable and too frequently–gullible customers.

This article (thanks Sam) highlighting the aggressive sales focus at JP Morgan’s Wealth “Manglement” division is pretty typical of the investment sales culture generally. See: Selling the Home Brand

“Everything is scripted for the brokers in an elite group at JPMorgan Chase: the sales pitches; the personal voice mail message; even the preferred desk candy, Glitterati Fruit & Berry.

In a three-inch-thick training manual, the bank, the nation’s largest, details how to recruit clients, pitch products and, ultimately, close the deal — or, as JPMorgan puts it, “get to Yes!”

The manual is part of an intensive, weeklong training course. But it is only the beginning for JPMorgan’s army of top advisers, who are critical to the bank’s rapid expansion into wealth management, a fast-growing and highly profitable business. Interviews with more than 20 current and former JPMorgan brokers, as well as hours of recorded conversations between a former adviser and his bosses, portray a sales-driven culture that is unusually aggressive, even by Wall Street standards.”

(listen to the audio tape clips embedded in the article for real life footage of managers directing and reprimanding their sales force.)

Despite all that has been written and revealed about this business over the years, still today a majority of hardworking, intelligent people continue to take their financial advice from the sales side. They will insist that their broker is “nice” or a “good person”. But will he or she ever tell you something that is in your best interest but hurts their own bottom line? Will they ever move your capital out of harm’s way in a bear market or when risk to capital becomes unreasonably high? What returns did their clients make in 2001-02, or 2008?? In all the glossy brochures and shiny shoes, these are the only things that really matter over time. The rest is merely seductive sales puff.

David Walker, Founder and CEO of the Comeback America Initiative and the former Comptroller General of the United States, is appalled by the lack of leadership and cooperation in Washington.

“We are here because of failure of the president, a failure of the Senate and a failure of the House to reach a reasoned and reasonable to avoid the sequester,” he says. “It is a global embarrassment.”

He says it’s time for Americans to come together and insist that our elected leaders start to actually lead, instead of intentionally putting us into crisis after crisis. “We the people have a responsibility to put pressure on our elected officials whether they be democrats, republicans or independents to do a deal and if they don’t do a deal, to throw them out,” he says.

And if Congress cannot make a deal, Walker is among a growing contingent who believe lawmakers should not be allowed to go on break. “No deal. No break,” he demands

. Here is a direct link to the video interview.

During secular bear periods, markets tend to revisit prior cycle highs and then retest prior cycle lows several times over 15-20 years. With the Dow at its third cycle peak, now once more near its 2000 and 2007 highs, we are about to see whether this secular bear is ending early after just 13 years, or about to enter the next cyclical bear market. Does the economy feel lucky?

Mark Hulbert, The Hulbert Financial Digest, explains what historically happens when the market hits new highs. Here is a direct link.

One thing seems clear: if the US economy is supposed to break out into a new secular boom phase from here, the 2/3rds that is dependent on consumer spending is not likely to be much help. This morning we learned that not only did the US consumer have the biggest income drop in more than 20 years in January, but the personal savings rate has now plunged back to the anemic levels seen in 2007. This is the opposite of progress. Historically, secular bears end when debt levels have been worked down and savings rates have been built up. This chart is not going in the right direction.


Chart source: www.zerohedge.com