Portrait of a Branch Manager; Ins and Outs of Annuity Suitability: July Research—Slideshow

The July issue of Research brings a fresh look at leadership issues

In this month’s cover story (“Portrait of a Branch Manager”) we profile Gregory Laetsch, the manager of Morgan Stanley’s Los Angeles complex. Jane Wollman Rusoff’s article brings out the genuine qualities of leadership that undoubtedly account for the success of his branches. An effefctive leader like Laetsch understands that the entire staff is the foundation of the advisor’s success. We look at the professional development of staff in a feature article by Ellen Uzelac. Columnist Raphael Lapin adds insight from the world of flight training, where the pilot’s very life depends on error-free instruction. He offers suggestions on how to apply this knowledge to educating clients.

Also in this issue, Moshe Milevsky has a seminal piece on the suitability issue you never hear about: why leaving the old annuity may be far more problematic than buying a new one.

Click through the following slides to preview other content in the July issue of Research.

Portrait of a Branch Manager

Meeting Gregory F. Laetsch, 6 feet 4 inches tall, 215 pounds and buff, you immediately think: football player.

And you wouldn’t be wrong. Fresh out of college, Laetsch was a receiver for the Seattle Seahawks. But a foot injury put the kibosh on his budding pro sports career the first season.

Bummer — except that the gridiron’s loss was Wall Street’s gain. For the past 31 years, Laetsch, 53, has chalked up victories as an outstanding player in the financial services arena, all three decades-plus at Smith Barney and its successor firms.

Appointed managing director and complex manager of Morgan Stanley Smith Barney’s seven-branch Los Angeles complex in 2009, following the two firms’ merger, Laetsch is something of a legend within the company, famed for his impeccable ethics and credibility, and reputation as a rare straight-shooter.

The Ins and Outs of Annuity Suitability

The word “suitability” evokes a unique reaction within the financial services industry. It carries legal as well as emotional baggage that goes well beyond the synonyms of appropriateness or correctness. And, for anyone active in the annuity business, being accused of enabling or advocating an unsuitable transaction can have far reaching (and career-harming) implications.

Most practitioners know this already, but it is still worth repeating. The recommendation to purchase any annuity — whether it is variable, fixed, immediate or deferred — must satisfy an extra layer of scrutiny, taking into account a myriad of personal and economic circumstances. Thanks to the shenanigans involving 95-year-old widows and 25-year surrender charges (or is it the other way around?), the suitability benchmark is higher and the paperwork more onerous, compared to non-annuity products. Whether this extra cost is commensurate with the benefits is debatable. Moshe Milevsky has more on the suitability issue you never hear about.

Fiduciary Matters

The prospect of a uniform fiduciary standard that would apply to all advice givers in the financial field is the subject of much current debate among industry participants and overseers. It will become even more of a hot topic in the coming months as the Securities and Exchange Commission decides whether and how to impose new fiduciary rules.

Fiduciary responsibility involves having a particularly high standard of care and loyalty. In the financial advisory field, it is typically understood to boil down to a strict requirement to put a client’s interests ahead of one’s own. Thus, a fiduciary standard differs from a suitability standard, which obligates the advisor to recommend products suitable for a client but not necessarily the best products regardless of the advisor’s fees. Kenneth Silber looks at the historical antecedents and contemporary applications of this headline-grabbing and contentious issue.

The Indispensable Staffer

Late last year, in a study group discussion among LPL Financial advisors in Southern California, brokerage executives asked the advisors to identify what they most needed help with to build their business.

Tops on their wish list: the professional development of staff.

“One of the clear messages was: ‘I need help with my staff. What can I do to help them grow?’ They want to offload, delegate, encourage staff to take on more responsibility,” observes Andy Kalbaugh, the firm’s executive vice president of business consulting. “The more productive and efficient the staff, the more productive and efficient the advisor will be.”

In response, LPL created AdminU, an educational curriculum to help support staff up their game when it comes to client service, office management, technology, and sales and marketing.  Ellen Uzelac reports that advisors with staff in enrolled in AdminU are already reporting rapid improvements in performance and productivity.

The Financial Advisor as Flight Trainer

A certified flight instructor is the quintessential teacher and one whose very life depends on his teaching acumen. Flying together with pilots-in-training requires nerves of steel because of the very great potential for danger. A novice pilot can put the aircraft into a dangerous altitude quite rapidly, and put his own life and that of his instructor in peril. The instructor needs to make sure that his instruction leaves no margin for that kind of error whatsoever — not the standard that most teachers need to meet. It should therefore be no surprise that I look towards these magnificent men in their flying machines for best practices in teaching and instruction.

Raphael Lapin explains that for financial advisors, as with flight instructors, the key to educating clients is to provide information, concepts and principles in such a way as to enable clients to integrate them, master them and develop confidence in applying them.

Inflated Science

In 1968, the Swedish central bank donated money to the Nobel Foundation to establish a Nobel Prize in economics. It became the sixth category in which the world’s most prestigious accolade was awarded, joining physics, chemistry, medicine, literature and peace. Economics, which when the other five prizes were created in the late 19th century had been in its infancy, now was legitimized. Indeed, a solid conceptual framework seemed to have been developed to analyze relationships between economic players and, equally important, to use the laws of economics to forecast the future, formulate policy and create stable and prosperous societies.

All that is now out the window. Recent economic history shows that both academic economists and economic and monetary policymakers do not know the first thing about inflation, which has far-reaching implications for economic science in general.

Alexei Bayer argues that existing economic models do not provide a useful framework for analyzing economic processes and relationships.

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