What is revenue sharing? It is an organized kickback. When a financial advisor participates in revenue sharing they’re not recommending the best investment for you, they’re recommending ones that paid them a kickback to push their mutual funds.
If you go to any company’s website, by law they must tell you in their disclosures if they’re taking money and if they’re getting a kickback. However, it is hard to find on their website besides also being cumbersome. One of the things we offer at Senior Financial is that if you come in to the office, we’ll show you what whichever company you’re with is getting in kickbacks and how it works. Listen to this disclosure from Merrill Lynch as an example; “Merrill Lynch makes available to its clients shares of those mutual funds whose affiliates have entered into contractual arrangements with Merrill Lynch that generally include the payment of one or more of the following fees described below. Funds that do not enter into these arrangements with Merrill Lynch are generally not offered to the clients.” Now, does that sound like a good deal for you as the investor or Merrill Lynch the company? Another disclosure example from Wells Fargo says, “This additional cash compensation may influence the selection of mutual funds that Wells Fargo advisors and its associates make available for recommendation. Wells Fargo advisors reserves the right to restrict the mutual fund companies that we offer to clients based on the payment of additional cash compensation.” There are similar disclosures from LPL Financial, RBC, Morgan Stanley, the list goes on. Everybody’s heard of Raymond James, they list every single company that gives them kickbacks so they can pay $32 million to name the stadium the Tampa Bay Buccaneers’s play at.
We have people come in and some people have never heard this before, they don’t realize that their advisor is recommending products that are not best for them, but that are best for the advisor and the company. They say, “I don’t believe you. I’m going to go ask my guy.” When they always come back, they respond in one of two ways.
The first thing they come back with is, “I asked my advisor. He said it’s no big deal, everybody does it.” Well, we don’t do it. And even if everybody else is doing it, does that mean it’s a good deal for you as the investor? Number one, it costs you money on your returns. Number two, it’s a conflict of interest. Your advisor is someone you need to be able to trust, and when they have a conflict of interest that creates a dilemma with what they’re recommending. When someone comes in from Edward Jones, I automatically know they have American funds in their portfolio. You can read right on their disclosure how much money they give back to Edward Jones for recommending those products. In 2019, American funds gave $92.8 million to Edward Jones in a kickback to recommend their products.
The second answer we always get is, “It’s really not that much money, $92 million from one company.” In this same disclosure, they disclosed that Edward Jones received revenue-sharing payments of approximately $228 million in 2019. During that same time, their net profit was a billion dollars. 20% of their net profit is coming from kickbacks and most of the people that are paying them don’t even realize they’re giving that away.
Here’s why companies are able to hide their revenue sharing so well. Looking at the disclosure from Amerprise, it’s 91 pages long. Do you think they’re going to put it on the first or second page that they’re ripping you off? Do you think they’re going to put it up in bold on the top? No, you have to go 65 pages into the disclosure to get to where they talk about revenue sharing and kickbacks and conflicts of interest from their mutual funds. If you make an appointment, we have 20 more of these in the office and we’ll show you what your company’s disclosure says. We’ll print it right off or we’ll show you on the website.
Do you want to know what our disclosure says? “We do not accept 12B-1 fees or other service-related fees or revenue sharing payments from the mutual fund companies or funds utilized in our advisory service.” If you work with us, you can trust that any recommendations we make are because it’s the best product with the best return, with the minimum amount of risk for your particular goals.
We’re as transparent as possible. We make a fee based on the assets and how we invest it, we don’t take any kickbacks, we don’t have any agenda, we don’t have any conflicts of interest. We don’t do what the rest of these companies do. If you come in to the office, we’ll show you exactly how we invest our money. It might not be appropriate for you and your goals, but we’ll show you. If you have the same risk tolerance and the same goals, we might invest some of our assets the exact same way.
We try to be as transparent as possible and we don’t want to have conflicts of interest or any kickback situation, so that you know if we recommend something that it’s the best recommendation for you.
This is why picking a financial advisor is one of the most important decisions you’ll ever make. You don’t treat it like you would when shopping for a car. These complex techniques are a unique wheelhouse for Jean Dorrell and her team of fiduciaries. Call our office at 352-307-8652, visit our website (www.senfinancial.com/schedule) to book an appointment, or register for an upcoming seminar. One office. In The Villages. For 30 years. We know retirees and their needs, do you know us?
*Investment Advisory Services offered through Bucket List Wealth Management LLC, a Registered Investment Advisor.
