Unlocking Real Value Blog

The Danger Of Selling Proprietary Products

When it rains it usually pours, but the last thing that JP Morgan needed was more bad press this past week, not only in industry publications but the New York Times as well. A number of former financial advisors claim that they were encouraged to favor JP Morgan’s own products even when there were better-performing and/or cheaper options available.

The issue of selling proprietary v. non-proprietary products goes deeper than JP Morgan however, and had been around for years. As an example, last year’s internal disagreement that became public at Bank of America/Merrill Lynch over whether or not pressure was, and should be, put on advisors to sell bank products to clients.

This latest focus on JP Morgan is bad timing for financial advisors – coming at a time of continuing anti-Wall Street sentiment and an investing environment where returns are hard to get. In football, they call it piling on!

(I’m going to focus here on how advisors should react to this ongoing stream of bad press. I’m not going to pass judgement on JP Morgan and others for their actions. Undoubtedly, pressure exists within certain financial institutions to sell proprietary products; one would have to be naive to assume otherwise.┬áBut the burden falls on advisors as well to resist this pressure; there is enough blame on all sides to go around.)

So what should advisors do? As with any potentially negative issue, they need to get in front of this one and proactively demonstrate to their clients that they always act in their best interest.

For advisors that have sold proprietary products, I suggest that you devise a plan to show clients how the investments that you have recommended to them made sense for, and fit into, their portfolios. Talk to them before they start asking questions. Take responsibility for your actions and don’t blame the company or anyone else for putting pressure on you – that’s a sure way to lose credibility.

If you haven’t sold proprietary products, discuss this issue with clients as well, because if you don’t, they will wonder about your motives (sad but true in the world we live in). Whether individually or through your social media outlets, reiterate how you work with clients and how your process is unbiased and your product choices holistic rather than profit-driven.

You have to and should defend your choices – why not turn it into a positive?


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