Am I in the right place?

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    [QUOTE=helado] Example 1:  You hold Vanguard 500 Admiral shares for your clients large cap position.  It has an ER of .05%.  Fidelity decides to go all "loss leader" on Vanguard and start charging .02% for it's SPARTAN S&P 500 index fund.  You have a $3 million client that 3 years down the road alleges that you continued to hold the Vanguard fund instead of trading to the Fidelity fund that would've saved him money, all so you wouldn't have to pay the ticket charges for the trade.  How do you defend that?   

Based on not wanting to have the client pay a very large LTCG on the money I invested for him on March 9th, 2009.... Because I'm a fucking genius! I figured $900 in ER's outweighed the 15% on $2mm in gains. 

Example 2:  You hold a 12 fund portfolio of ETFs for your clients in a 50/50 allocation.  The market tanks 2 years from now and your clients are down anywhere from 10 - 25%.  One of your clients goes to see an attorney because he is pissed that he lost money (yes, this happens ALL the time).  That attorney sees that you pay these costs for you clients, and decide to allege that you STUBBORNLY held those same ETFs, even though the market was tanking, and you should've known better and "gotten your client off the tracks" before it bottomed out.  How do you defend that?  

Because we are following a long term strategy based on their ISP that is outlined here, here and here. Said client is in the top tax bracket and on numerous occasions documented here, here and here didn't want to sell or rebalance on numerous occasions because the market was up and didn't want to pay taxes on the gains just yet.

Example 3: You hold PIMCO Total Return fund for your clients.  The fund has been lagging the benchmark for about a year now.  You continue to hold it because Bill Gross is the bond king, active management usually wins with fixed income, and you aren't ready to give the fund the boot quite yet.  However, 2 more years go by, and Bill Gross continues to lag the benchmark by 1% annually.  You now have lots of clients that have lagged a simple bond index by 1% a year for 3 years, AND the MAJORITY of PIMCO Total Return's peer funds have not only beaten it, but beaten the index as well.  Your client then goes to an attorney, and they allege that you didn't want to dump the fund even though it lagged, and lagged, and lagged because YOU didn't want to eat the transaction costs.  

How fucking dare you disrespect PTTAX! It's the backbone of this fucking country and is a symbol for the very blanket of freedom that you get to sleep under at night. I don't remember the douchebags name who called me a soulless monster for recommending a client sell it and rebalance it must, but I'm sure he must be dating or blowing the fund manager, Bruce Jenner's doppelgänger. 

These 3 scenarios all get worse if that attorney puts an ad in your local newspaper asking your clients to contact him/her regarding a lawsuit about you taking advantage of them for your own paycheck.

In every scenario above, you have no defense.  However, if the CLIENT pays the cost of the transaction, you have absolutely ZERO conflict of interest when it comes to what fund to hold.  You can say "buying this fund over that fund, or this ETF over that fund, etc. doesn't affect me WHATSOEVER, so I am only doing what I think is best for you."

THIS IS OUR INDUSTRY.  Every other fucking cock sucking thing you do has to be document, document, document and cover your fucking ass so some jerkoff ambulance chasing attorney can't link up with some whiny ass client that thinks his advisor should pay for his losses because the S&P 500 shit the bed 30%.  

It is, what it is. 

Edited by wiredup - Sep/05/2014 at 12:33am