Could “Reverse Churning” be Worth a Fee?

When working on commission, brokers have an incentive to make frequent trades in their customers' accounts. Done to excess, such trading becomes improper "churning." Happily, the trend to fee-based accounts removes this incentive.

But . . .ironically, brokers now may face charges of "reverse churning" – that is, loafing. If they make no trades in their customers' accounts, the SEC and FINRA wonder, why should they earn a fee?  Shouldn't they at least be pushing customers into, say,  inverse ETFs?

Maybe not. History suggests that efforts to time the market cost investors dearly. One study found that over 20 years when the S&P 500 produced an annualized return of 9 percent, the average stock fund investor earned 5 percent.

Might reverse churning actually help investors by producing higher returns?

When the Rich Lost $10 Trillion

From our archives, a reminder that even the rich became poorer a decade ago.

Inheritance Begins at 30

Beneficiaries shouldn't get their inheritances before age 30, according to a majority of respondents to a Financial Times survey of wealthy readers.  And despite the conventional wisdom offered by estate planners, some may not give the same amount to each child.

In reality, inheriting too soon probably isn't the problem. As one respondent commented, rising life expectancy is deferring many inheritances to an age when it is too late enjoy or spend the proceeds.

Sidelight: Respondents did not view their private bankers as an estate planning resource.

When asked whether they had discussed wealth transfers with their advisors, the response was mainly ‘no’, with comments such as: "They don’t have the expertise or experience to help like in the past"; "No point, they just want to sell you inappropriate and expensive “products"; and my personal favourite: "Yes. Some. But they nod out of deference. Silly people."

Why Stocks Are Like Women

This ad ran in The New Yorker 60 years ago, a time when Wall Street men regarded women as a breed apart.

"Stocks are somewhat like women," Merrill Lynch's copywriter asserts. Like stocks, all women are not alike. "For instance, some women move in schools, like fish; others are strictly independent. Some women are busy as waltzing mice; others are languid and lackadaisical. Some are fickle; others are faithful. They come in all shapes, sizes, and temperaments . . . to suit the shapes, sizes and temperaments of men."

The good news: Male copywriters don't write this sort of stuff any more.

The bad news: Wall Street still views women as a breed apart. Women in the financial industry get promoted more slowly and rise to senior positions more rarely, a CNBC-Linkedin survey finds.