Retail investors who look to their "financial advisors" at firms such as JPMorgan Chase (JPM) for advice on managing their retirement funds have now learned that JPMorgan advisors were nothing more than "salesmen" peddling the firm's own "house" products rather than those which were in the best interests of their clients. Those products provided a bigger "vig" for the house.
As the New York Times noted in an article last week, it was part of JPMorgan's strategy to rely heavily on retail sales to mom and pop investors after the crash. "Facing a slump after the financial crisis, JPMorgan Chase turned to ordinary investors to make up for the lost profit," the Times reported in an article by Susanne Craig and Jessica Silver-Greenberg. "But as the bank became one of the nation's largest mutual fund managers, some current and former brokers say it emphasized its sales over clients' needs."
As the Times reported, the firm put its interests before those of the client. "I was selling JPMorgan funds that often had weak performance records, and I was doing it for no other reason than to enrich the firm," said Geoffrey Tomes, who left JPMorgan last year and is now an adviser at Urso Investment Management. "I couldn't call myself objective."
And then there was this nugget. "It said financial adviser on my business card, but that's not what JPMorgan actually let me be," said Mathew Goldberg, a former broker who now works at the Manhattan Wealth Management Group. "I had to be a salesman even if what I was selling wasn't that great."
Such revelations about an alleged conflict of interest at JPMorgan between its retail brokers and money management interest are but the latest in a seemingly endless list of scandals that the public is coming to realize represent the real Wall Street. Even the interest rates we all paid for our mortgages and other loans based on "LIBOR" were rigged by Barclays (BCS) and other banks to burnish their balance sheets.
Goldman Sachs (GS) holding "trading huddles" for its best clients only, front running "high frequency" traders, the upsized and botched Facebook (FB) IPO, insider trading- what's an investor to think?
The politicians need to take a look at what's going on on Wall Street and tell the voters how they plan to tame this monster and level the playing field for investors. It's clear that the little guy doesn't stand a chance.
Just ask the financial advisors at JPMorgan.
Disclosure: Zamansky & Associates are securities attorneys representing investors in federal and state litigation and arbitration against financial institutions, including JPMorgan Chase and other banks involved in the LIBOR-manipulation matter.