Last week, a broker-dealer (owned by a major financial advisory firm and insurance company) asked its advisors to sign “letters of support” to show they will move their client accounts wherever the broker-dealer may sell them.
This broker-dealer has been the subject of controversy recently when investments it sold investors defaulted, and it fought reimbursing those clients for nearly two years. The “letter of support” is essentially an agreement to mitigate losses and prop up the value of the firm.
One might expect this from Wall Street, but as an independent financial advisor, I suppose I have a different take. I feel sorry for the broker-advisors of this firm who are an unenviable position of being asked to support a company before their client relationships.
But it seems despite my shock, investors don’t really mind. A recent study by Forrester Research found two out of three clients of Merrill Lynch did not agree with the statement – “My financial provider does what’s best for me, not just its own bottom line.”
It all makes me wonder how some firms have clients at all.