(Sarcasm Intended)

Most of Old Peak’s clients previously worked with an advisor at a large bank. Fortunately for us – and, I believe, for them – these clients discovered that the “innumerable” benefits of working with a large bank are, ahem, less than innumerable.

Before starting Old Peak Finance, some of my family’s investment portfolio was managed by a large bank. I know what they do. I was so disillusioned that I started Old Peak to offer a very different service.

Here’s my tongue-in-cheek list of the so-called advantages of working with a big bank. If you don’t work with one of these giants of Wall Street, please share it with someone who does for a reality-check.

1. The big banks have lots of expertise and resources. (Please ignore footnote 1 below. Footnotes are tedious. Only lawyers read them. Don’t you have something better to do than read a footnote?)
2. The big banks have a brand name and reputation that gives people comfort. Some of their reputation is earned; some is paid for in advertising dollars. Some is real; some is illusory. Some is current; some is outdated. If you can’t invest the time to find a financial planner which will provide real, comprehensive advice for a more reasonable fee, hiring a big bank isn’t a terrible solution. But a big bank will almost always charge more and do less. (Please ignore footnote 2 below.)
3. They have nice client appreciation functions, where they trot out someone who pretends to know what will happen in the stock market over the next few months or years and who looks the part. (Please ignore footnote 3 below.)
4. They always have new investment products, which they have created because they are smart, and which they will sell to you because they think you’re not as smart. (Please ignore footnote 4 below.)
5. The fees are much higher than working with an independent firm like Old Peak Finance, which means their people can take great vacations, buy expensive second homes, or sock a ton of money into their investment accounts. (Footnote 5 below is sort of okay to read if you insist.)
6. They will manage any conflicts of interest, keeping the client in mind. In fact, they have large departments dedicated to this. (Please ignore footnote 6 below.)
7. They will create a unique investment portfolio for you, picking only the stocks which will beat the market and the other products like hedge funds which only the cool, rich people own. (Definitely ignore footnotes 7a and 7b below.)
8. They will create a comprehensive financial plan, because a lot of clients have figured out that planning – not just investing – is the key to financial success, so clients started asking them to do this, and they have relented grudgingly. (Please ignore footnote 8 below.)

The footnotes: These should be read really fast or preferably not at all. Think of them like the disclaimer at the end of a commercial for a pharmaceutical product, where someone warns you of potential risks, speaking at twice normal human speed. We wanted to print these footnotes in a font size so small that they were illegible, but someone in compliance told us they had to be legible without a magnifying glass.

Footnote 1: Of course, you must pay for the bank’s resources and expertise, and on average their fees mean your net returns will likely be well below the market. Also, their experts are really busy with other, more important clients, so don’t expect they will have time for your account.

Footnote 2: If you don’t exactly like the brand, no worries: it will change every few years, as they acquire another firm, are acquired, or go out of business. Recognize the names Lehman Brothers, Salomon Brothers, Kidder Peabody, EF Hutton, Shearson, Paine Webber, Merrill Lynch Pearce Fenner & Smith, or Smith Barney? All gone.

Footnote 3: At the client appreciation event, you will have had several drinks before the speaker begins his or her talk. That’s useful, because their analyst almost surely cannot forecast the market, and it would be awkward if you remembered what he or she said at the end of the year.

Footnote 4: The product of the month is usually outrageously complex, with lots of hidden fees. Don’t worry if you don’t want to buy it – there will be another, newer product next month.

Footnote 5: Oops! Sorry. This selling point was supposed to go into the list the bank uses to recruit brokers.

Footnote 6: Well, actually, they won’t put your interests first. They will put their interests first. True, they won’t sell you anything which is not “suitable” (a defined term for regulators). But if they have a choice between two “suitable” products, they will go with the one which pays them a higher fee. Seriously – what did you expect?

Footnote 7a: In fact, it’s risky for any big bank to pick stocks, because if they really underperform the market, clients will bolt. So, the bank makes sure their recommended portfolio has a very broad sampling and will perform give-or-take in line with the overall market, not including their fees. So, it looks like they are doing valuable work.

Footnote 7b: Your unique investment portfolio will look remarkably similar to lots of their other portfolios. Usually, there are a small number of portfolios in-house, to fit a few risk levels. In other words, you can have any ice cream flavor you want, as long as you want chocolate, strawberry or vanilla. (Well, maybe also chocolate chip or cookies and cream.)

Footnote 8: By “comprehensive”, we mean their most junior recruit will throw some assumptions into a piece of software and print out a report that’s around 50 pages with lots of colors and graphs and, yes, lots of footnotes. Please don’t ask any of the senior people to explain it. Don’t expect this will take them more than a few minutes because, honestly, this isn’t a great use of their time. They need to be out prospecting.