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RMR Wealth Management - Thursday, April 12, 2012
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New York Times Op-Ed By Greg Smith formerly of Goldman Sachs.......Ringing Endorsement of Independent Wealth Management?

RMR Wealth Management - Wednesday, March 14, 2012


March 14, 2012 NYT

Why I Am Leaving Goldman Sachs


TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.

Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.

Five things investors should do before year end by Brian Mayer

RMR Wealth Management - Monday, December 19, 2011

Tax Planning

Every investor needs to evaluate whether he/she has taxable gains or losses at the end of the year for 2011.  If you have realized losses you can deduct $3,000.00 from your 2011 taxes.  If you have more than $3,000.00 in realized losses, you can carry those losses forward to a future year to offset realized gains.  If you have realized gains, you should look to see if you have any unrealized losses to offset those realized gains.  If you sell a security to book a realized loss you can either wait 30 days to buy back the same security or buy a similar security right away to maintain similar exposure in your portfolio.  Any transactions you choose must be completed by year end.

Retirement Planning

Every investor needs to evaluate the amount being saved in his/her various retirement accounts.  If you invest in a 401(k) plan you can defer up to $16,500.00 from your salary.  If you have not reached that amount yet, you still have time to contribute more with your final paycheck of the year.  If you are over the age of 50, you can utilize a catch up contribution which maximizes your contribution at $22,000.00.  This change can make a huge difference especially if you have an employer who matches your contributions.  If you cannot change this year, use this as an opportunity to adjust your contributions for 2012.  Always remember these contributions are tax deductible and all investments grow tax deferred until you begin withdrawals during retirement.

Roth IRA Conversion

Investors may want to consider converting traditional IRA accounts to Roth IRA accounts.  When you convert you pay the taxes now on the amount you convert, but all investments grow tax free and withdrawals at retirement are also tax free.  This is a strategy that works if you believe your tax bracket will be higher in the future.

Asset Allocation

The end of the year is a good time to take a moment and decide whether your portfolio has an asset allocation that aligns with your goals and objectives.  Many times when markets fluctuate, portfolios tend to become over-weighted in a particular sector or asset class.  Use this time to review your allocation and make sure your portfolio is positioned properly for 2012.


The final item investors can focus on is looking at what the budget appears to be for 2012.  Look for ways to reduce expenses so that this time next year you have more money in your pocket.  Look to see if you can refinance any real estate or other forms of debt.  Have your insurance policies evaluated to make sure you are not overpaying for your coverage.  Finally, look to make charitable contributions with either cash or securities to maximize your deductions as well as helping a cause you wish to support.

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