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Wary Investors Are Seeking Out Objective Voices

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By ZENWAY - Posted on 29 July 2009

In the aftermath of the financial-market crisis, investors are leaving Wall Street to sign on with independent investment advisers. Last year, registered investment advisers brought in more than $108 billion of net new assets into the three largest custodians, according to Charles Schwab Corp., which holds roughly $500 billion in assets for such advisers. By contrast, the four major Wall Street brokerage firms saw an outflow of $8 billion in 2008. Investors seeking to repair their damaged nest eggs say the chief lure of independent advisers is more-objective guidance. Read Related Articles on Advisers Connie Ashline of Kankakee, Ill., decided to follow her adviser from Smith Barney, Dorie Rosenband, when the New Yorker started her own firm in March. “I feel that by my paying her as an independent adviser, she would be in a greater position to take my best interests at heart,” says Ms. Ashline, 75 years old. “The reality is that the brokerage firms are set up for the brokerage of products,” says Ms. Rosenband. Read more: Other Considerations Why Investors Are Leaving Wall Street Investment programs sold at big Wall Street banks could carry multiple layers of fees to be shared by the bank, the banker, the advisor, layers of managers, the wrap program team, and the various mutual fund managers. The banks often have high incentives for high fee products and tough restrictions against low fee alternatives. The worst of all is that investors are often charged high fees when they lose money. When I left a major bank, I realized that, at a big Wall Street firm, I simply don't have the tools and the environment to help my clients do well. A 2% annual wrap fee over 10 years is 20%. And there are additional hidden fees like soft dollar arrangements and revenue sharing arrangements at various big institutions. Independent firms can often reduce fees by almost 50% with more focused services to fewer clients. Also, with performance-based arrangements, you pay no fees when you lose money! Warren Buffett taught us, cutting down the layers of fees on the investors' accounts is very important in order to achieve good results over the long term. For a complimentary analysis of the fees and performances of your portfolio, please email: info (at)

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