The Loyalty Effect


What's the value of great customer service and high quality?

Friday, I got a call from Ameriprise HQ telling me that my Financial Advisor was leaving the firm. I was taken aback. I have (or thought) I had a GREAT relationship with him. He and his wife have had dinner at my house and I've referred 4 clients to him.

Ameripise told me they had re-assigned me to an Advisor in Vienna, VA (simply put: not close to where I live). I said, "you need to do better than that" and the woman said she'd call back.

What did I do next? I hung up and called Josh.

"Dude, what is it?



  1. you are getting out of the financial advising business?
  2. you got fired
  3. you don't want me as a client anymore?

I was expecting a call from you."

He replied, "well, there's another option...I am legally forbidden from calling you to tell you. I am moving to another firm and can't reach out for 1 month."

That was all he could say (and on his behalf, I called the people whom I had referred.)

Last night, the new Advisor called to talk with us. "Honestly," I said, "we're probably going wherever Josh goes."

Now, that is loyalty, earned by years of hard work and dilligence.

Reminded me of a great book I read a few years ago called The Loyalty Effect which talks about how companies that foster loyalty are more profitable.

Looks like Josh has that system down. Let me know if you need a GREAT financial advisor and I'll hook you up.

Comments (7)
  1. Anne says:

    Do you know exactly what you are paying Josh in fees?

    I know a lot of people that used an Ameriprise advisor and thought they had a great relationship with their advisor. Come to find out, they was paying way more in fees than they knew about.

    I suggest you ask Josh for a written list of all fees you are paying. See how much they add up to and look at this chart:

    http://www.retireearlyhomepage.com/advise.html

    I bet he never added up all your fees and showed you a chart like this. And isn’t that what a ‘financial advisor’ should be doing?

    Did you know that people using these ‘financial advisors’ (that are really product salesmen) get much worse returns than people doing their own investing?

    http://www.bankrate.com/brm/news/BoomerBucks/20061206_investment_advice_a1.asp

    Did you know Ameriprise has 36 regulatory actions against them? I suggest you take a look at NASD Broker Check. They have payed hundreds of millions in fines.

    Ask Josh if he takes fiduciary responsibility for doing what is in your best interest when he sells you products. I can tell you he does not take fiduciary responsibility. If he says he does, get it in writing.

    Hopefully you haven’t been sold any variable annuities.

    Please check into all this. Learn about all the fees you are probably paying. Are you paying loads? Are you in a wrap account? What are you paying in fund fees? Learn about all the hidden costs.

    Ameriprise brokers are taught how to hard sell products. They work from scripts. They are taught how to buddy up to the clients. Show a personal interest. That’s what salesmen do.

    Please do some research. Years of retirement and tens or even hundreds of thousands of YOUR dollars depend on it.

    Please, don’t let him smooth talk you. If you are afraid to ask him about all of this, he has done an excellent job manipulating you.

    I do not mean to sound confrontational. But I have seen way too many people that thought their Ameriprise ‘financial advisor’ was great when in fact they were paying through the nose and underperforming the market.

    Please, look into this.  

  2. Shelby says:

    Hmm. As a client of a fantastic advisor (not Josh) and someone who has been around the industry for almost 10 years, I would say that clearly the person commenting above has <i>no idea</i> how heavily regulated and scrutinized the advisors are, and I would also say that she is being sold down the river on silly eTrade hype if she believes that she can actually select better investments than those a good advisor recommends and not pay fees for it (there are always fees).

    Let me repeat: THERE ARE ALWAYS FEES no matter who clicks the Submit button.

    Yes, you have to pay for expertise. That’s the way it works, when you hire a professional. Much like… Microsoft "solutions"? It’s not like buying a car, a single transaction where you can shop around the MSRP to make sure the car salesman gets no money for the sale.

    A list of fees will tell you nothing about your investments, except what you are paying up front for initiating the investment. A comparative chart of how much money you have made on those investments, a look at what future returns are expected — that would tell you more about what you are getting for the fees. It’s like looking at a chart of a human life cycle with no years attached to it.

    I suppose it all depends on the advisor you get; I’m sure some are less than scrupulous about selling products that are best for them, not the client. I would argue that this is true of any firm, actually. Josh, and the people who work for him in the past and present, are among the best in the business.

    And I’m not even an advisor, btw. Just someone who understands the value of a good one.

  3. Anne says:

    "I would say that clearly the person commenting above has <i>no idea</i> how heavily regulated and scrutinized the advisors are,"

    I do have an idea. Not heavily enough it seems, considering all the scandals. And, that Ameriprise has 36 regulatory actions against it and has paid millions of dollars in fines should concern any client.

    http://news.morningstar.com/article/article.asp?id=150861&_QSBPA=Y&_QSBPA=Y

    "I would also say that she is being sold down the river on silly eTrade "

    Actually, the study I mention has nothing to do with eTrade. It was written by Daniel Bergstresser of Harvard Business School, John Chalmers of the University of Oregon, and Peter Tufano of Harvard Business School. Please check their credentials. And, the authors fully expected to find tangible evidence that financial advisors DID add value. They were surprised to find the opposite was true.

    In addition, the authors had the cooperation and support of some of the largest and most respected industry groups and research organizations in America for this study.

    They received guidance and comments from seminar participants at the University of Arizona, UC Berkeley, Michigan State University, Oregon, Stanford, the University of Oregon / Journal of Financial Economics Conference on Delegated Portfolio Management, the ICI Academic/Practitioner Conference, the 2006 American Finance Association Meetings, and from staff members of the Investment Company Institute and National Quality Review.Researchers from major universities around the country contributed their guidance and expertise to the authors. In addition, staff members of the Investment Company Institute and representatives of various mutual fund companies assisted the authors.

    Obviously the study methodology is rigorous and sound or I doubt Harvard Business School Division of Research, MIT and the University

    of Oregon would have funded it.

    Massive amounts of data involved were analyzed for years – and from many different angles.

    Morningstar and Financial Research Corporation contributed data.    

    If you can find any studies that can contradict the findings of this study, please let me know.

    But as it stands now, people that do their own investing do much better than those using ‘experts’.

    "THERE ARE ALWAYS FEES"

    And it certainly matters how much those fees are. The difference between .2% and 2% is HUGE.

    http://www.retireearlyhomepage.com/advise.html

    "Yes, you have to pay for expertise."

    Except that paying massive amounts of your nestegg to THESE experts HURTS your returns. The very thing you hope the experts will help you with and what you are paying them for.

    "A list of fees will tell you nothing about your investments, "

    It will. Higher cost investments underperform lower cost investments, as a principle. Think about it. Considering survivorship bias, how many actively managed funds beat their respective index over the last 20 years?

    "A comparative chart of how much money you have made on those investments,"

    Past performance does not predict future performance. This is an investing fundamental. Past performance can help judge volitility.

    "a look at what future returns are expected "

    Expected? You mean guessed at. You do not know what future returns will be. I do not know. No one knows.

    "It’s like looking at a chart of a human life cycle with no years attached to it."

    False analogy. Please read some basic books on investing. Like ‘Investing for Dummies’ and books by John Bogle. I’m not trying to insult you. I am trying to get you to use your rational mind to evaluate. You sound just like many other people I have met. The first stage is denial, which is where you are. It’s hard to face up to the fact that your trusted advisor that is possibly your friend or even a relative (natural market, you know) isn’t ‘taking care of you’. And it’s harder still to think that maybe you need to start learning the seemingly complex world of investing and take charge of your investing. But you can get past that. I did. Many others have. It’s a wonderful feeling to know what is happening to your financial future.

    Ask yourself this: Did your financial advisor tally up every single fee and show you a chart on how fees impact your nestegg? I know he did not.

    "I suppose it all depends on the advisor you get"

    And how will someone find a good advisor?

    http://www.efmoody.com/whouse.html

    "Josh, and the people who work for him in the past and present, are among the best in the business."

    Then why are they working for a firm with many significant conflicts of interest with the clients? Why are they working for a firm with 36 regulatory actions against it. A firm that carelessly loses personal data, won’t disclose crutial information, lies to clients about market timing. A firm that revenue shares, participates in soft dollar arrangements and charges 12b-1 fees. A firm that hires kids with no experience and makes them memorize sales scripts and go after their natural market? A firm that offers prizes for pushing expensive, inappropriate products on clients?

    "And I’m not even an advisor, btw. Just someone who understands the value of a good one."

    You don’t understand. Read the study.

    http://www.people.hbs.edu/ptufano/bbenefits_Nov2004.pdf

    I am not trying to argue with you. I am trying to tell you that many people have said just what you have aid and then found out that they were very wrong. Please try to get over your denial and take an active look at what is happening to your money. Really.

  4. Anne says:

    To add to my comments above, here is an interesting article from Warren Buffett:

    http://money.cnn.com/2006/03/05/news/newsmakers/buffett_fortune/index.htm

  5. MSDN Archive says:

    I think the question on my mind, Anne, is what is your interest in this? Why are you so passionate about it? I love it, don’t get me wrong, but curious how/why you know so much?

  6. Anne says:

    (Shouldn’t every investor know what I know?! Their financial future is at stake. How important is that?)

    But to answer: After reading a couple articles about how the ‘financial advice’ industry works, I wanted to learn more. I care about my financial future.    

    The more I learn the more I understand that, with a few exceptions, the ‘financial advice’ industry is pretty close to a scam.

    Most ‘financial advisors’ are brokers, pushing products as their main goal. They don’t compare all products to see what is best for you. They set you up to buy their products, which is almost certainly not best for you but very good for them.  

    Or they put people into wrap accounts that charge a percent of assets year after year after year, even though the client needs and gets only a couple hours of attention a year. Think about it. People pay 1.5% of their assets ongoing…for what? Their portfolio has already been set up. So ongoing there is rebalancing and maybe a couple phone calls and….what? I have shown how that wrap fee adds over time.

    I frequently run into people that are paying terrible fees but don’t have a clue that they are paying ANY fees. Ameriprise clients included. Especially.

    I suppose I have a sense of justice because it angers me when I see people paying literally hundreds of thousands of dollars over time for professional advice that gets them much lower returns than DIY’ers get.

    It also saddens me when I give this kind of information to people and they seem to be more interested in me than the information I am providing.

    Please, do your research on investing. That’s what is interesting.

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