Nate Geraci
January 15, 2014
In a recent Bloomberg article, The ETF Store was referenced as “the polar opposite of Jordan Belfort’s rapacious Stratton Oakmont”. If you’re not familiar with Jordan Belfort and Stratton Oakmont, they are the main focus of the popular movie “The Wolf of Wall Street”, starring Leonardo DiCaprio. DiCaprio plays Belfort and the movie depicts how Belfort’s crooked firm, Stratton Oakmont, swindles unsuspecting investors out of millions of dollars by brokering worthless penny stocks.
The Bloomberg article, written by Eric Balchunas, was titled “Cut Out the Wolves of Wall Street with ETFs” and explains how scams such as the one run at Stratton Oakmont aren’t the only way investors can be taken. Specifically, Balchunas mentions the $13 trillion mutual fund industry, where mutual fund brokers push expensive mutual funds in return for fat commission checks (which are paid directly out of investors’ pockets). We’ve covered this subject in great detail on past ETF Store Shows (see “RIA vs Broker – Do You Know the Difference”) and believe it is critical for investors to understand whether their advisor has a financial incentive to push certain types of investments. Even in today’s highly regulated financial services industry, there are still a number of ways for investors to be swindled – even if the “scam” being run isn’t outwardly illegal. Mutual fund brokers can be wolves in sheep’s clothing.
This brings us back to ETFs and The ETF Store. Balchunas suggested that low cost ETFs, which offer no kickbacks to brokers, are an excellent way to steer clear of today’s “Wolves of Wall Street”. We couldn’t agree more and would add that fee-based (as opposed to commission based), registered investment advisors such as The ETF Store, can also help protect you from unscrupulous mutual fund brokers. Firms such as ours are paid based on a small percentage of the assets we manage. We do not receive commissions to direct our clients into certain investments. Since our founding, it has been our goal to be the anti-Wall Street firm. We place an emphasis on transparency, low costs and putting our clients’ interests first. There will always be wolves on Wall Street, but if you follow the money trail on how these wolves get paid, you can avoid becoming their lunch.
