Nobody’s too happy with the big banks these days. The public distrusts them and the regulators have been levying hefty fines for misdeeds before, during and after the financial crisis. The fines are big, but who’s really paying the price?
How does $93B in fines affect you?
Fines on the six major Wall Street firms – JP Morgan, Bank of America, Morgan Stanley, Goldman Sachs, Citigroup, and Wells Fargo – now total $93 billion since 2010. And that’s just within the United States. In Europe, Deutsche Bank, Lloyds, UBS, and others are setting aside billions of euros and pounds for what they are referring to as “known and unknown” litigation. All of these banks are adding to their reserves quarter after quarter for these very issues.
But who is picking up the tab? When the cost of doing business at the biggest firms now includes setting aside considerably large sums of money for ongoing and potential legal issues, who pays for the increased stress at the bottom line? The answer is: You do. The fines may not equal the profits made during the craze leading into the subprime crisis, but they’re taking a big chunk out of current earnings.
In Greek mythology, Sisyphus was forced to roll an enormous boulder up a hill, only to watch it roll back down again. The big banks are no fans of Sisyphus – one way or another they will make sure they do not end up working for free.
Lost in complexity
The big banks’ legal departments clearly have their work cut out for them. We keep seeing examples of rogue employees (remember the London Whale?) and unmonitored departments creating their own rulebooks. These shenanigans distract focus from the legitimate work that benefits customers. And fines drive up costs that are eventually passed on to institutional and individual clients alike.
With the ultimate goals of the banks being survival and profitability, the internal messes make you wonder how much attention is really focused on serving customers. Not to mention the fact that roughly 12 percent of financial advisors move to rival banks in any given year. Where’s the customer on this disjointed priority list?
Power in simplicity
Osbon Capital operates as a glass box. On the regulatory side we are proud to pay NRS as our industry leading compliance consultant. We know the rules benefit individual investors and we like to see them enforced. In fact, we see compliance as a competitive advantage for bottom line, reputation, and longevity of the firm. We welcome a peek into our engine room to see how we operate.
This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
Adviser does not endorse the statements, services or performance of any third-party vendor.
Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.
Any IPO alerts are purely informational and should not be construed as recommendations to invest.
Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.
Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.