UBS target of AG probe - Business First of Buffalo:
Business First of Buffalo - December 13, 2006
"State Attorney General Eliot Spitzer's office has filed suit against UBS Financial Services Inc., contending that the brokerage firm's "InsightOne" program overcharged consumers. Spitzer said the program promised the creation of an "advice-based" account that would deliver personalized investment advice and other financial planning services.
However, the attorney general said UBS aggressively sold the accounts to investors who would have done better by paying per-transaction commissions. UBS also created a conflict of interest for its brokers by giving them a financial incentive to enroll investors in InsightOne instead of steering them toward more appropriate accounts, Spitzer said.
According to court papers filed by Spitzer's office, UBS charged one elderly InsightOne client more than $35,000 for just four trades over two years -- some $33,000 more than she would have paid in a traditional brokerage account.
Spitzer's suit was filed in state Supreme Court in Manhattan. UBS said in a statement that it is committed to "clients' individual needs" and it denied that "InSightOne" was pushed on some customers instead of cheaper options. "UBS categorically denies that the program was part of a scheme to disadvantage clients, and intends to defend itself vigorously in this matter," the company said.
It also complained that Spitzer's office "did not review or consider relevant data that supports the firm's position" before it filed the suit. "
Spitzer is actually correct on this one. The Wall Street Journal called me the other to ask for my comments on the case and I told them that this is a classic case of a brokerage firm attempting to disguise itself as a financial planning operation without taking on the responsibility that a planning organization has to its clients.
The broker involved has only a "suitability" standard to meet, not a "fiduciary" standard. In other words the broker at UBS was not REQUIRED to put the client's best interest first. It turns out the broker broke both standards and put the client in an unsuitable account and also failed to place the clients best interest first.
Brokerage firms everywhere are perpetrating a fraud on the public, assisted by the SEC in that they are holding themselves out as fiduciaries when they are not. They try to position themselves to look just like a company similar to mine, but they are not held to the same standards - this is not right.
You should not do business with a brokerage firm.
Scott Dauenhauer, CFP(r), MSFP, AIF(r)