The Bank Retirement Model is Broken

By John Berzellini

The great recession taught us that the banks and mutual fund complexes are not able to protect us from market down turns. In fact, many could not protect themselves.

The surviving institutions are currently lobbying congress to maintain the status quo, and are spending big on advertising.  The advertising is targeting baby boomers, and is trying to convince us that they represent security and objectivity.  According to them, all we have to do is follow the green line.

The fact is, these institutions are selling the same broken model that does a poor job and tends to create much anxiety for the consumer. Just take a look at our “Where’s the Beef” side bar.  The numbers do the talking, and they are telling us that something is terribly wrong with the bank model.

Objective advice is the cornerstone of a client advisor relationship, and objective advice leads to successful retirement planning. Bank and mutual fund profit centers are not compatible with objectivity. In their advertising, these institutions create an illusion of objectivity and security.  The reality is, the banks and mutual fund companies make more money if you buy their stuff and if you trade more; and the bank advisor’s compensation is directly related to how much the bank makes on your account.

 Try the new comprehensive financial planning model,  it works like this:

  •  The Financial Advisor works directly for the client
  • The Financial Advisor’s compensation is not affected by selling or buying securities
  • The Financial Advisor acts as fiduciary providing ongoing advice, rather than a registered representative of a broker dealer who determines suitability at time of sale
  • The Financial Advisor acts as your financial intermediary in a complicated market place
  • Banks are used in the traditional role of third party custodians, safeguarding and accounting for client’s assets.