In Your Interest: Avoiding Proprietary Product Loading

Investors looking to put their money with an advisor may need to be wary as they may not actually be getting the best advice possible. Many advisors are involved in the practice of proprietary product loading (PPL). That is to say that many investors will put their clients money into portfolios pushed on them by the firms/banks that they work at.

A recent study by research and consulting firm Credo showed that many major banks/investment firms have over 50% of their client’s money invested in products and portfolios created by their affiliated manufacturer. Major banks and investment firms will often make it mandatory for their advisors to engage in PPL.

Why should investors be wary of this? When you give your money to an advisor, the expectation is that they will do what is best with your money. Once outside influences begin to interfere with that decision making, the client’s money is in danger of not reaching its full potential.

When it comes to portfolios, there is no such thing as apples-to-apples and each one is built differently. When an advisor leans on PPL, not only does it mean that they are not necessarily putting your money in the best place, but it may also be a warning sign that they are not that interested in researching the best options. Over 3-4 years, you rarely find the same funds sitting in the top quartile when judged on performance. This means that your advisor needs to be diligent in their research to ensure that your money is being set up for success.

The Ramberran Wealth Group makes careful choices and does not engage in PPL. We ensure that our client’s finances are put toward our well researched options. If you would like more information or a second opinion on the portfolios you are currently invested in, connect with us so we can make sure everyone is acting in your best interest.

Sources:
https://credo.ca/advisors-load-clients-portfolios-with-proprietary-products/
https://www.moneyobserver.com/news/only-16-funds-have-delivered-top-quartile-returns-over-each-past-three-years