Unlocking Real Value Blog

AK In The News: Brokers Have Affiliated-Fund Bias

I was asked to comment last week on a poll in Ignites (A Financial Times Service) on how common in-house bias is in the industry. The question came in the wake of allegations by former JP Morgan advisors that they were pressured to use proprietary funds in the face of better performing and less expensive alternatives.

(I blogged about this a few weeks ago – The Danger of Selling Proprietary Products – posted on July 5th)

While the poll results indicated that most respondents said that bias is very common, which I agree with, what was surprising to me was that the poll also seemed to indicate that advisors/brokers tend to favor these funds. I strongly disagree with this assessment.

To quote from the article, and in keeping with my previous post:

“Andy Klausner, founder or strategic consultancy AK Advisory Partners, says the Ignites poll results are surprising given the wealth management industry’s emphasis on selecting best-of-breed money managers, as opposed to the firm’s proprietary products . “I don’t think it is true” that brokers favor in-house products, he says, “I think the reality is that most advisors don’t want any perception of conflict of interest.

However, it would be naive to think that there is no pressure put on advisors. Recently it was JP Morgan, and last year there were questions about Merrill Lynch selling Bank of America banking products.” Klausner says. “But if advisors feel pressure, they should stand up for themselves. Advisors should always be proactively showing clients how they come up with the recommendations that they make.””

What do you think?

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