Charles Schwab is still Pushing Change in the Financial Services Business

This article is a great summary of what has driven Charles Schwab to transform the financial services business for over 40 years.  And at 81 he’s still very much involved in putting client interests first.  Here is the opening with emphasis added.

Charles Schwab’s cheeks redden in a mixture of amusement and outrage as he recites the ways people on Wall Street make money. They take little nicks, he says, gesticulating with his left hand as if gripping a kitchen knife. High fees, fat spreads, excessive trades. “They all want to do it the old-fashioned way: Take advantage of the customer,” the white-haired chairman and founder of Charles Schwab Corp. says at his San Francisco office, a comfortable 3,000 miles or so west of the New York Stock Exchange. “Get the high commission, baby!”

His blue eyes widen behind his glasses as he describes the Schwab way: Take Wall Street’s principle of free enterprise “but minimize the friction, the cost of investing. It’s gotta be reduced down to near zero.”

Is Your Advisor a Fiduciary?

When considering working with a financial professional this is the first question you should ask. If the answer is not yes, stop. This article succinctly lays out the importance of the Fiduciary standard and how the brokerage industry has resisted actions to make it the only standard. Brokerages prefer the Suitability standard which as you might guess favors them by completely watering down the level of “care” that must be used by its employees. Rather than being required to act in your best interests, Suitability in essence allows brokers to act in there own best interest by selling you products and services that maximize their income, often to the detriment of their clients.

As the article illustrates – you wouldn’t let a car dealer just sell you a car that just made them the most money. Don’t hire a financial professional who would do the same!

Starting this Blog

I am starting this blog for several reasons. I’ve been interested in investing and personal finance issues for many years. Decades in fact. I read continuously – online, books, magazines – anything that can add to my knowledge of investing. Earlier this year I started my own Registered Investment Advisor firm as a way of helping others directly with their investments and finances. This is my personal blog – see disclaimer. But as some have said – I write so that I know what I think – so this will also help me crystallize my thoughts and therefore my ability to advise.

I will share my observations and lessons learned here, across investing and personal finance topics, as well as broader technology issues, as many changes in the world of finance are being driven by rapid technological change. The term FinTech has been coined to broadly cover a wide range of areas related to finance that are being disrupted by the application of technology. I spent 20 years in the Internet Media and Technology space – a field that came to be known as AdTech – and saw how technology changed and improved online advertising. FinTech therefore seems very appropriate as a back drop to my new business as an RIA.

But the primary focus will be trying to explain and simplify the world of investing and personal finance. It’s an area where complexity and jargon have prevailed, as a key part of company’s business plans. By mystifying and un-necessarily complicating the issues, it is possible to act as the expert and to charge high fees. That model is being turned on its head and I hope to add my two cents to the effort.