Greed is...

Last month while on meetings in NYC, I had a free afternoon. The sequel to the movie Wall Street had just come out and even though I was hesitant about looking like some pathetic loser going to a movie theater alone, I walked over to the Zeigfeld on 54^th, grabbed some popcorn, a diet coke and sat in this huge cavernous place that seats over 1,000 and joined a handful of others who took it in.

What prompted me to comment on the movie here was looking at the fi360 blog by Blaine Aiken where he describes the impact of the original movie, contrasts the current one and how it plays into what’s taking place today with regulatory reform (link here: fi360-WallStreet Movie blog ). Like Aiken, this original Wall Street movie came out at an impacting time for me back in 1987. I had recently completed the final exam for my CFP, we had just endured “Black Monday” where the market crashed over 500 points or 22% over a couple days’ time, and the business was digesting the enactment of the Tax Reform Act ’86 that was the death knell to the limited partnership boon (remember those 20% loads?!). While even back then we were doing needs based selling using financial planning, some of my colleagues were making a mint promoting single premium life before the MEC laws came to be the following year. I had an organization of about 40 advisors in San Diego and I remember one in particular named Dean who epitomized the era of “Greed is Good”. Dean’s method for prospecting was both simple and bold. He bought a bright red Ferrari that cost multiples of the apartment he lived in, went to La Jolla and parked it next to other high end cars and just waited. When the owner of the other car arrived, Dean would step out of the Ferrari and say, “nice car” so as to engage in a conversation about their mutual interests. He had the gift of BS and almost every contact led to an appointment. Many of us who knew Dean thought this guy was going to be either the richest person in San Diego or end up in jail. I fired Dean over a compliance issue shortly thereafter and found out a couple years later that he ultimately ended up in jail. It turned out that greed was not so good for Dean after all.

So bringing it back current, earlier this month I had another set of meetings in NYC and met with a high level executive in financial services. We traded war stories and observations about the business. She is now affiliated with a quality Private Equity firm after having a career running some big businesses at the highest levels for Fidelity and most recently at Morgan Stanley. We both agreed that the transformation taking place in retail financial services now is swift, wide reaching, and will change the business and business models forever…hopefully in a good way. But she made one observation that struck me. She said, “At Fidelity, it really was all about the customer…they came first. But most recently at Morgan Stanley, it was all about the broker” We went on and talked about whether this time around, the regulators will get it right and force the broker centric cultures towards a customer centric one. Or will the culture of greed continue.

Every time someone says “this time it’s different” something later comes up to prove it wrong. Human nature and behavior are fairly predictable and usually revert back to the norm…good, bad or indifferent. So with that in mind, I do believe the right set of circumstances are in place to materially change the way financial services products and services are distributed. If the regulators/politicians get it right and plug their ears to the product peddlers making noise, they have an opportunity to come clean on the slogan, “change you can believe in”. Products will become less important and process then becomes the focus. Process driven Financial Planning has an opportunity to grow up as an industry and be recognized as a true profession. But as quickly as I become hopeful for meaningful change, I’m reminded of the waiver they gave indexed annuities just earlier this year.

Even though the most recent version of Wall Street was panned by many critics, I liked it. Just as the original came out after the markets had been whipsawed with Black Friday exposing the underbelly of the business, this one hit after our most recent market slam down where the ingredients leading up to the calamity were the same; Greed. And for me an irony of ironies happened as I walked out of the theater, again hoping to go unnoticed. Coming down the street walking past me on 54^th was a former colleague of mine whose behavior always seemed to be driven by greed. He was also a driving influence on my separation from my former firm that I had spent my entire career with. It caused me to reflect on those whose paths I’ve crossed who were driven by greed much like Dean from over 20 years ago and today with this former colleague who had just walked by. Those driven by greed often appear prosperous and successful in the short term but pay miserably in the end. Regulations can’t change a human trait that has existed since the beginning of time. But they can set in place conditions that don’t promote it. Let’s hope it really is different this time and they get it right.

“A Native American grandfather talking to his young grandson tells the boy he has two wolves inside of him struggling with each other. The first is the wolf of peace, love and kindness. The other wolf is fear, greed and hatred. "Which wolf will win, grandfather?" asks the young boy. "Whichever one I feed," is the reply.”