YouSaid · the spoken record

Ron Rhoades

lines on the record: 121
first: 2016-01-15
most recent: 2016-01-15
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Right, and it's going to get worse with the DOL rule because the DOL rule says individual advisors cannot be paid more depending on what they recommend, but at the firm level, the firms can still receive more. And this disconnect is going to become much bigger. And the result of that is brokers are not going to be happy when they go to work, and then we want to go someplace where they will be happy going to work, where they will be on the same side of the table as their clients. And they'll enjoy working with their clients in a more or less conflict-free environment.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I remember There's really a difference between what brokers want to do. Most individual brokers want to do the right thing for their clients. Most brokerage firms are worried about their top line and bottom line. And there's really this huge disconnect there.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. And advisors are leaving because a lot of times at the brokerage firms then being sold told, push this proprietary mutual fund or push these bonds out that may be long-term bonds or push this investment IPO initial public offering.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the solution is to recognize that. Financial advisors have investments in these client relationships just as much as firms do. And perhaps this client relationship should not be owned by the firm itself, but ought to be shared with the financial advisor, and if a financial advisor leaves, whatever clients are taken, the financial advisor has to remit part of the fees from those clients for a certain number of years. But of those clients stay with the firm, the firm has to pay for part of that client relationship over to the financial advisor. That's a fair way of doing it. And it eliminates all this litigation.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“They're in limbo. Yeah, then the old firm is still calling the client, trying to establish a relationship with another advisor at that firm, while the other broker who left is out there also trying to serve the client, but can't get information. And it's just a mess for a client to be in.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, what happens is your broker leaves, you want to follow them, the broker sends transfer forms back over, the brokerage firm is upset about this, they'll slow down the transfer process, they won't return calls. The client is not being served in the middle of all this most of the time”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“If they join another brokerage firm that's a member of the protocol. But a lot of them are going independent and not going that way. And that's where you see the litigation.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, that was designed to eliminate the lawsuits that were flying between brokerage firms. And is about four hundred brokerage firms that have signed on to that agreement. And for the life of me, I can't imagine why any investment advisory firm or even a smaller broker dealer who wants to recruit would sign that protocol. Because it's basically say, okay, we get this team, we have to pay you some money. And that's how we resolve it. If a team from a wirehouse wants to go independent. They can do that. They can start your own firm and go independent. Nobody's going to pay for their clients. They just take the client's 80% of them perhaps with them. So”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's not to say that there aren't fights about that, but they end up with about 80% of the clients on average. That's a pretty healthy number. So despite all the anti-solicitation provisions that you see in brokerage firm broker agreements, a lot of the clients are following them.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“You see that and you see it accelerating. I think there's been several reasons for that. One is there's firms out there that are roll-up firms recall them that are actually recruiting brokers out of the wirehouse environment, the good teams. And they are fostering the process of getting out. Beyond that, as the article mentioned, a lot of the ties that they have in these deferred compensation packages are going away. And that's really going to give brokers the freedom. When brokers do leave, about 80% of the clients typically follow them. That's a pretty guilty percentage.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“An extremely strong SEC chair, and two at least two commissioners who are also extremely strong, to really start protecting consumers instead of protecting Wall Street and Vinra.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the fiduciary standard says, for example, when you have a conflict of interest, you have to do all these things. And even then the transaction that you propose to the client must remain substantively fair, even with information. The arbitration process, a lot of the arbitrators come from the industry, but they don't come from the RIA side of the industry. They come mainly from the broker side of the industry. And if you haven't operated in a fiduciary environment or you have not studied fiduciary law and what it requires and why fiduciary standards are applied, Your perception of what is fair is going to be dramatically different.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“In fact, a complaint of breach of fiduciary is the most common complaint in arbitration, but not that many of those make it forward. Because you had to overcome this threshold, is the person to fiduciary, then you have to apply the fiduciary standard. One of the big problems in arbitration is arbitrators are trained to do what's fair. In essence, they're trained to ignore some of the procedural hurdles that it takes to get into make a lawsuit under the 34 Act, the Exchange Act And they're trained to do what's fair with clients. But that application of fairness actually works to lower the fiduciary strictness of the fiduciary standard in the way it's applied.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That is likely to be applied in certain states because the rules are not the same in every state, the way the common law has developed. Of course, you're being subject to arbitration here, too.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Correct. And if people get sued, if brokers get sued, they don't get sued under the advisors act in the way the SEC applies that, they get sued under state common law and how that's applied. And fiduciary status attaches to the entirety of the relationship. And it really constrains what you're able to do. So”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Reconcile those functions. You also remember under fiduciary law. Fiduciary is a status. You become a fiduciary to their client, which means the entire relationship should be subject to that fiduciary duty.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not for the same client. If you're trying to be a fiduciary to a client and at the same time you're trying to sell them something. No person can wear two hats at the same time. It's an old adage that goes back really millennia. It basically says no man can serve two masters at one time. So you cannot”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Financial planning is both broad in what it covers, tax planning, estate planning, insurance issues, maintaining debt, paying off debt, major expenditures planning. So many people make huge mistakes in that area. And investments is only one part of that. So you have this very broad area, but it's also pretty deep. And So, the only way to start connecting those dots, if you do one decision over here, how does it affect something way over here, is through experience. And it's going to take five to ten years of experience, I think, for most people to become an excellent financial planner.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That has enough questions to really figure it out where someone needs to be as opposed to what their tolerance for risk is. It helps you, but people's need to take on risk is something completely different. And that's set by a lot of different factors. You need to have Handholding with the client to ascertain their need for risk, yeah, investment management, you know, I tell my students, I can train you to be a great investment portfolio manager in a year. But if you want to be a great financial planner, it's going to take you five to ten years.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know how you can set a person's asset allocation without having a personal conversation with them. Because it's not about risk tolerance. And a lot of times you'll see the robo advisors do these online risk tolerance questionnaires. Sure, they're really good.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it was a change that Developed from software that financial advisors have been using for over a decade for rebalancing portfolios tax efficiently. Also, software that has been used to gather client information more efficiently. And also report out especially portfolio reporting software online updated every day. And you combine those three things with a slick interface and you adopt some mass market methodology to it, lower the fees. And that's essentially what a rowboad advisor is. It's been an interesting development. I'm not sure how long it's going to last”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that Good financial counselor is a steward of not only wealth, but also the client's hopes and dreams. And when we think about wealth and the accumulation of wealth, that's not an ends, that's a means to an end. And what you do with wealth is you buy. Can spend to better develop your relationships and maintain relationships with family and friends, or you explore the world with it in some way, expand your horizons, or you give back to the community in some way. And all of those things, if you ask, what is the purpose of all those things, it all leads to one thing, happiness. And not happiness is a destination, but happiness every day along the journey. So I really think... Financial advisors do that. They are stewards of clients' happiness.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Wow, we can't believe it. We've seen 40, 50 people on the anti-fiduary side, including the CEOs of some of our big investment banks, making personal trips down there to lobby.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Definitely. I would say once we got past the December budget negotiations, I don't see anything on the horizon that is a hurdle to this being implemented. It's not to say that the most intensive coordinated lobbying effort that Capitol Hill has ever seen is not occurring as we speak right now. Oh, really? Oh, absolutely. Every time I go to Capitol Hill, it's like...”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Every trip to DC, it's usually seeing about five a day. Either them or their staffs, their legislative council, their general counsel. Or the committee staff, very influential committee staff, but also while we're there, we typically reach out to some of the organizations. Visits to the SEC, there's still some stuff going on there.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sometimes they are, but not this trip. Typically, it's the Senate finance and Senate banking committees, the House Education Workforce Committee.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, I would say this there's always a tension in our society between. One body of thought that says people have to have self-responsibility for what they do themselves. And there's another body of thought that says, well, wait a minute, the law needs to protect people sometimes. It needs to be a little paternalistic. And people hate that word paternalistic. In financial services, really the question is, Does the average American Almost any American, can they navigate this complex financial and investment world themselves when people are trying to sell some really lousy stuff to them? My experience with that is maybe one in a thousand?”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, Wall Street is really heavily allowing Congress to stop it. They didn't succeed in the budget negotiations back in December. That was really their biggest chance. They're still trying desperately to get some bills passed. I'm going down to DC right after this to meet Own Capitol Hills to try to stop some of that. A lot of there's 80 organizations that are profidiary supporting the rule. I think it's got a really, really good chance of getting through this year.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Then you are a fiduciary. And all these fiduciary obligations result. Imagine. When going from about 20% of publicly traded investments being subject to fiduciary standard, mostly in defined benefit plans and endowment funds. To somewhere between 40 to 50 percent, that's a tipping point.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Spring and hopefully implement it by the end of 2016. And it's going to basically say if you're providing advice to either define contribution plans that are governed by ERISA, like 401k plans, some 403Bs. Or if you're providing advice to IRA accounts.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, department labor is in the middle of fixing this with something called its conflict of interest rule, supposed to be finalized, come out later this year.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“If they're offering a 401 cash, they do. And they need, employers, they're not in the business of creating portfolios for their employees. They run a business. So they need a trusted advisor. And if they don't have a trusted advisor, the employer is the one who is on the hook, but under the suitability standard, if some broker recommended here's 20 funds and they're all horrible funds, the broker's not on the hook.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, Assistant Secretary Phyllis Borsi over at the Department of Labor, who I really admire. When she came on board about seven years ago, she asked her staff, what are the things that we can do to improve retirement security for Americans? And they came up with a list. And two of those things have already been implemented Disclosures to plan sponsors And disclosures to planned participants. They've already had a huge impact once you disclose all the fees and costs, it tends to lower things”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“One would hope. So if you say, well, I'm going to get an extra. 50 basis points when I sell you this on an ongoing compensation.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so having a conflict of interest is a breach of a fiduciary duty. You have to cure that breach. How do you do that? You disclose the conflict. and its ramifications to the client, you do that affirmatively, you make sure the client understands, and that's a duty that's subjectively applied. You get the client's informed consent, and here's the key No clients ever can consent to be harmed.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So that's a minor conflict of interest. I would say it's not going to influence my judgment at all. But if I went to 12 of those conferences a year, it might. So you have to, there aren't small conflicts everybody has, but it's avoiding those major conflicts. But even if you don't avoid a conflict, then this is the key to the duty of loyalty. A lot of people out there, including someone Wall Street lawyers, they think that all that's required is you have to disclose the conflict of interest. But that's not what the fiduciary law says at all.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Generally, it's easy, but for example, I'll go to a custodial conference that I use their custodian for my client funds. And I don't pay for the education at the conference. I pay my own way there, the hotel, but they give some free food. And even some free entertainment and stuff like that”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the only way to do that is to avoid conflicts of interest, to say, hey, we agree on how much I'm going to get paid. I'm going to do my best to not receive any third-party compensation whatsoever.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“First, that you're dealing with an expert. Someone who, if you say, I want a prudent portfolio, that's what they'll give you. And generally speaking, this is an assumption that that's what you want, although not all advisors live up to And second, what really makes the fiduciary standard distinctive is the duty of loyalty, the duty to keep your best interest first paramount.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Tremendous. And one of the interesting things is, and it doesn't happen for all the SEC staff, but it does happen generally between New York and Washington. You leave Wall Street, you get a bonus, they go work at a government agency and a promise that you'll have a job when you come back. Does that influence what you do in Washington? Certainly it does. There's no way around the fact that it's going to influence your decision making. And right now, the chair of the SEC is surrounded by senior staff that really hold an allegiance to Wall Street and don't want the fiduciary standards.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“From the rest of the industry. The SEC commissioners did not sign off on that. It's not signed by any SEC commissioner Kind of an indication of the split in the commission that has persisted for probably at least a decade now. But now the situation at the SEC is quite changed. You have, you always have staff turnover. Right. And the senior staff at the SEC, they all worked on Wall Street before. And a lot of them worked at the SEC, went to Wall Street, came back.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Back in 2011, that study came out from the SEC staff And we had spent a lot of time with the SEC, myself and many other fiduciary advocates, educating them about the fiduciary standard and why it was so important and what this would mean if it was adopted. And it came out with what I thought was a pretty strong report on it.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there were a lot of people involved in that effort to stop them. It was a bill that's coming out of the Senate that was proposed and there was just a lot of opposition from consumer groups, from myself, from many others to that to basically say, listen, we shouldn't be rewarding FINRA by giving them oversight of investment advisors. Yes, we need more oversight. We need more inspections, but this is not...”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“All right, well, that's a conflict of interest situation. They basically led to this huge conflict of interest in financial services. They maintained that. When they adopted their first rule book in 1942, even though they acknowledged in their first newsletter that brokers are often fiduciaries, Clients that they have a relationship of trust and confidence with, there's nothing in the Fenra rulebook now or back then. This has the word fiduciary in”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let me take this to the 50,000 foot view. Back in 1938, Senator Maloney. Who was the author of the Maloney Act that led to the creation of NASD, which is now Finroth? He said, the purpose of this SRO is to create an organization that will gradually over time raise the standard of conduct for those in the securities business to the various highest standard under the law. In other words, raise it to the fiduciary standard. That vision has never been put in place. If we go back to the 40s, Finra, its biggest accomplishment it wrote was preventing the separation of brokers from dealers.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Gross negligence, perhaps, is outraged. And a suitability is really A standard that it's very difficult to actually say what it is. It's so vague.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Suitability essentially says don't sell things that explode. That you know we're going to explode. And perhaps for elderly clients, don't even sell firecrackers. But suitability is basically says you don't have a duty of care. All you have to do is make sure that Investment could be held by this particular client. It doesn't have to be the best investment if it's in a taxable account. It doesn't have to be tax efficient. It doesn't have to be a low cost investment. In fact, it can be a very high cost investment. From a standpoint, it doesn't even require you to think about an entire portfolio together and how you can minimize the risk in that portfolio. It doesn't even require the application of what we've known for 65 years now, modern portfolio theory”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Just governed by a suitability stand is something that's far less. It's amazing in this world that we have so many service providers that have a duty of care. And what the suitability doctrine really does, it was adopted way back in the early 20th century when the whole theory of negligence was developing in the law. Was it basically enacted because we didn't want to hold brokers responsible for stock recommendations when they were only executing stock trades?”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, for financial services, what it means is you have to have a certain level of expertise. And apply that expertise in designing investment strategies and in selecting investment products. And that's part of a duty of care of the fiduciary standard, the duty care. The other part is the duty of loyalty, which means you've got to keep the client's best interest paramount. What's interesting is that most brokers who are not acting as fiduciaries don't have either of these duties.”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“To some degree, yes, because once you start eliminating all these hidden fees and you get down to lower fees, all the academic research shows lower fees means higher returns for investors. An investor is starting to catch on to this”
2016-01-15 · Masters in Business · Interview With Ron Rhoades: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source