Christopher MarkowskiWall Street Fraud0 Comments

Comrade Jones

An advisor from Edward Jones admitted to AdvisorHUB that the firm was much like the Soviet Union in that they are in the business of pushing products and policies that benefit the General Partners first.  “In reference to Jones being like the USSR.  There is nothing going on at that firm that is in the best interest of the client.  And the poor folks they hire with zero financial experience lap up the Kool-Aid without question, because Jim Bob and Dwayne Jones make you feel so gosh darn good.  Take Advisory Solutions (managed account program), where they are double dipping with their own funds.”   It has been our experience in speaking with Edward Jones clients from around the country that the USSR is alive and well and keeping their clients in bread and toilet paper lines.  Another example, “What Edward Jones is doing and is allowed to do is criminal.  They are firing a lot of great advisors.  Great advisors are let go because they do the right thing by discounting fees for clients or selling a bond the correct way.  How about the lavish 5-star trips that the firm sends 90% of their advisors that are paid by the mutual fund companies who pay to be in the Jones system?”

Bad Will Hunting

A former Massachusetts Institute of Technology professor was found guilty of running a $500 million hedge-fund scam.  Gabriel Bitran, who also happened to be an associate dean at MIT’s Sloan School of Management, and his son lured investors to GMB Capital Management LLC with the usual bull-excrement claims of market returns far-exceeding the norm utilizing his superior MIT intellect.  What was really off-putting was the fact that his fellow MIT professors came out in mass to support the Madoff of MIT.  It didn’t work.

Gabriel Bitran you’re going to jail!  ow do you like  How do you like them apples?

Your Financial Plan Out-Sourced To India??

Something is quite rotten at Ameriprise Financial and its advisors are not happy.  Three examples from AdvisorHUB…  “Ameriprise is a throwback to the 1990’s minus any investment banking.  A firm that is a shell of a company.  It offers its brokers the least support in the industry.  A routine call to the back office can take 20-30 minutes when it would take two anywhere else.  Its big push of financial planning is a total scam to push its annuities and high-priced insurance.” 

“The best part is the entire financial planning department is outsourced in India.  100 percent!  Morale of the people in the firm I know has to be the lowest in the industry.” 

“Ameriprise is the real nightmare.  I am sure brokers at J.P. Morgan are miserable but at least they do not try to push their insurance products through Costco!  Every advisor in my office would gladly return to their prior firm or will leave the day their contract ends.  The company could care less about its employees or clients.” 

At issue here, as well, is the contract system that keeps brokers at a firm for a set number of years.  Granted these contracts often have retainer bonuses attached to them and the brokers get a nice check when moving firms, but how does that benefit the client?  A true fiduciary would up and leave any firm and deal with the consequences if it is in the best interest of their clients.  We did, a couple of decades ago.  The most important thing a true professional should be considering when deciding on a firm is their clientele.  That advisor needs to be able to move his people and the hint of any impropriety or change of culture.  If that means forgoing a bonus check, than so be it.

Silly Client, Know Your Place

Wine entrepreneur Peter Deutsch thought he was going to be taken care of.  Fidelity Family Office Services sent a team out to do the dog and pony ass-kissing routine with tales of all glorious super duper special bespoke services that they would lavish upon him.  In less than a year later Mr. Deutsch wasn’t even allowed to enter a trade.

What happened was that the savvy Deutsch was on to something in the Chinese markets, an opportunity that would be enormously profitable.  He was going to take over a troubled company and then turn it around.  His investment was north of $40 million.  Mr. Deutsch tried to enter trades in attempt to gain the remaining five million shares he needed and was shut down by Fidelity.  A Fidelity employee called to inform him that they were “uncomfortable” with his purchases.  By Fidelity order and decree, he could no longer buy the stock, and with that order, a pretty hefty chunk of his family’s wealth went bye-bye.

Mr. Deutsch made it his mission to discover the real reasons behind Fidelity’s conduct.  Bloomberg reported that the details of his battle have been emerging from internal company e-mails and sworn testimony.  While he was trying to gain control of the company, he had a formidable rival…Fidelity.  Yes, that same Fidelity that sent over all those real nice salespeople promising him the sun, the moon and the stars.  Mr. Deutsch states that Fidelity was secretly buying the stock so aggressively that it drove up the price of the company at the same time they were supposed to be helping him build a stake.  He also states that Fidelity was also using his shares against his wishes for its benefit.  Fidelity’s response was typical deny, repudiate, and rebut.

The moral of the story…big investment firms serve one master, themselves.  Don’t let all those fancy golf outings and steak dinners fool you!  I don’t care how “private” a client you are.  You, just like Mr. Deutsch are expendable and will be “churned and burned” if it helps the bottom line or someone’s bonus check.

More Free Dinner Scams

Enough already!  If you receive an invitation for a Free Dinner by any investment firm looking to pitch you on their next can’t miss idea, THROW IT OUT.  I am sick and tired of reporting on these scams.  It reminds me of some slasher horror film where the very attractive, young yet intelligence deprived girl puts herself in an obvious position of mortal danger to then have herself disemboweled by a machete.

How did she not see that coming?

How did you not see it coming?

Four men have been charged with fraud for soliciting senior citizens with free dinner investment seminars in Florida and then pitching them false information about on the performance.  The crew created fraudulent marketing materials, including some with performance numbers that were taken directly from another firm’s website.  The complaint further states that the crew used these materials to mislead seniors who responded to their mass-mailing offer of a free dinner at a Tampa restaurant.  The money they took from the senior citizens was never invested but rather split between the group of self-described investment experts.

I hate repeating myself but, once again…ALL FREE DINNER INVESTMENT INVITES MUST BE THROWN INTO THE GARBAGE Immediately or else.

Whack the Rat

JPMorgan after finding out that one of its advisors went outside the firm and alerted the regulators that clients were being mistreated went out of their way to destroy whom they obviously deemed a rat.  Johnny Burris alerted regulators that JPMorgan supervisors pressured him (been there) to sell proprietary product over superior offerings by competing firms.  JPMorgan fabricated client complaints against him (been there as well) and duped them into signing off.

One of the clients told the New York Times that she signed some vague document on the obscure promise of getting money back.  She claims that she never understood what the document was and she had “no problem” with Burris.  Another client stated that he could have never written the complaint submitted by JPMorgan because he was “essentially unable to read or write.” 

Burris was promoted in 2012 to an elite private client group and was upset about what his marching orders were.  He then recorded his supervisors in secret, with them dictating that he sell JPMorgan product.  Burris sent the recordings to the media and regulators.  His recordings have led to an SEC investigation, which eventually had JPMorgan paying a $100 million fine.

The manufactured complaints hurt Mr. Burris in finding a new place to work as an upstanding firm would be overtly cautious in hiring an advisor with multiple complaints.  JP Morgan went so far as to falsely accuse him of conducting unauthorized trades in accounts.  One of JPMorgan’s minions assisted clients in writing letters “as a courtesy” typing up what the clients told her and reading it back to the clients.  The clients stated that they never read back the complaints prior to having them sign off and the letters in no way reflected their sentiments.  

Sales Contests

In the classic film, Glengarry Glen Ross, sales manager Blake played by Alec Baldwin, rips into his sales team of real estate agents selling dubious investments in a vacation property known as Rio Rancho.  Blake alerts the staff of the month’s sales contest, first place being a Cadillac Eldorado, second place, a set of steak knives and third place…“You’re fired.”

Unfortunately, most investors have a Madison Avenue produced ideal of what takes place inside these investment firms.  The only difference between what happens at a Glengarry Glen Ross type real estate outfit or a Boiler Room operation and big investment firm might come down to where one went to an Ivy League school or none at all.  In essence it is the same thing with a different pedigree that ultimately leads to the same dour outcome for the investor.

Morgan Stanley decided to start having its sales team start selling a product known as a securities-based loan (SBL), which is a big money maker for the firm.  Total sales jumped by 31% in 2015 to $25 billion.  Morgan Stanley had its advisors work as teams and offered them financial incentives and other perks such as NBA tickets to incentivize the brokers.

One of Morgan Stanley’s former advisors stated, “I remember having a late-night sales contest in our complex and the winner got a pair of Orlando Magic tickets if they sold the most SBL’s that night.  They held it at night so that the advisors could focus on just selling the SBL’s and not be distracted by trading or other work.  It’s kind of an old-school sales ritual type of thing similar to the movie Glengarry Glen Ross.  Most advisors weren’t too happy about being forced to sell lines of credit, but it was a big focus of Morgan Stanley’s.”

Sales contests are “frowned upon” by the regulators at brokerage firms and are illegal at Registered investment Advisors.  The response from Morgan Stanley, “Client suitability and best interests are primary considerations when opening these accounts.”

My response, Gilipolleces! C’EST des conneries! Bockmist! Cazzate!

Editors JPMorgan Wrote Client Complaints Against Whistleblower Financial Advisor IQ 12/7/15

Editors Coffee’s For Closers Only At Morgan Stanley’s Sales Contests New York Post 3/26/16

Editors All Hail Edward Jones Partners AdvisorHUB 11/30/15

Editors Ugliness Continues at Edward Jones; What I See Each Day is Sickening AdvisorHUB  9/14/15

Editors Ex-MIT Professor Gets 3.75 Years For Madoff-Linked Scam Bloomberg News 12/16/15

Editors Ameriprise: The Costco of Finance AdvisorHUB 11/30/15

Weinberg Neil A Wine Mogul Says Fidelity Cheated Him Out Of Millions Bloomberg 4/20/16

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