Who Manages Your Money?

Investors have pulled billions out of full-service brokerage firms and are turning to independent financial planners. Should you do the same? MoneyWatch editors discuss.

Jill Schlesinger: I'm Jill Schlesinger, Editor-at-Large. Jack Otter: And I'm Jack Otter, Executive Editor. Jill Schlesinger: In today's Reality Check, investors have pulled billions of dollars out of full- service brokerage houses. Should you follow suit? Jack, we're seeing a pretty interesting trend. People are leaving big brokerage firms like UBS, Merrill Lynch, Morgan Stanley, in droves. What's going on? Why are they leaving? Jack Otter: They sure are, and they're leaving because they lost millions and millions of dollars. And they just want to get away from the guy they associate with losing all that money. But I think they are asking a very good question. And the question is, "What was I paying for?" And maybe they'll decide, you know what? I would have done even worse without them, and some money will start flow back in that direction. But I think a lot of people are realizing that there are other options out there for managing money. Jill Schlesinger: And, you know, when you talk about that, it's always funny because people get embarrassed. They don't want to ask their broker too many questions. If you're at a big brokerage house, or even if you're just managing your own money, what are the questions that you should ask when considering moving elsewhere? Jack Otter: Well, number one is, "What do I need." So, for instance, if you just have a chunk of change, and you want somebody to invest it in the best way possible, then maybe go to a brokerage house, and maybe they would charge you one percent of your assets under management. And let's hope they make enough for you to cover that not and a lot more. Another thing is you might decide, "You know what? I need to get my entire financial life in order. Are these funds that my 401K is invested in, are they any good or not? All these tax bills I'm getting; should I be getting them?" Then you might hire a comprehensive planner who would look at the holistic issue of your financial life and help you get it together. Jill Schlesinger: And then finally, you really want to also say, "Is this person really acting in my best behalf?" Right? I mean, we really need to talk about that. Jack Otter: That is the "F" word. People are gonna hear a lot of that word in the next few months. It's "fiduciary." And what it means is a person who has a legal obligation to act in your best interest. Now, you'd think, well, of course, duh, a broker should have that. But actually, as you know, they don't necessarily. Jill Schlesinger: And so we want everybody to ask these questions. We want them to take responsibility and really know what you need. And that's your Reality Check.