According to Cerulli Associates Inc., the big wire-houses manage over $4.7 trillion in client assets. However, it is estimated that $50 billion is wasted each year by clients paying undisclosed and unnecessary fees or losses based on inappropriate product choices and high expense levels.
When customer go from one brokerage firm to another, the practice is that the new firm wants to review their portfolios, and of course sell new products, many of which are often manufactured by the firm. These are high-commission structured products.
Cerulli Associates’ Findings
Cerulli analyzed at least one hundred structured notes and found none to be in the customer’s best interests.
The study also found tremendous mark-up in bonds or fixed income securities, including one $40 million bond portfolio which had been marked-up by $600,000 which was also undisclosed to a customer that was told they were paying low management fees.
Another abuse appears to be the over-selling of Class A mutual fund shares, instead of other more efficient share classes, where excess fees and product costs may exceed 100 basis points or more even for very large and sophisticated customers.
The study found that these are just examples as to how what is good for the brokerage firm may not be good for the customer, and the “tax” they pay to support their self-serving business models, and have nothing to do with the fines imposed by regulators but are examples of systemic, perfectly legal behavior not in the best interests of the customer.
If you have been the victim of investment fraud, and have suffered losses as the result of the purchase of structured notes, reverse convertible notes, or other synthetic financial products manufactured by Wall Street, and designed to further their interests as opposed to yours, you should have your claims evaluated by a lawyer.
Guiliano Law Group
Our Practice is limited to the representation of investors in claims against stockbrokers and investment professionals for fraud, the sale of unsuitable investments, breach of fiduciary duty, failure to supervise. National Practice. Contingent Fee. Free Consultation. If you have suffered losses a the result of the recommendation of inverse and leveraged ETFs by your stockbroker or investment professional and were unaware of the risk associated with these securities, contact us for a free confidential evaluation at (877) SEC-ATTY.
