Name: Joseph Russo
Company: Advantage Financial Group, Inc.
Mantra: Eschew Obfuscation
For Joe Russo, his profession has a simple mission: to advise and advocate for clients and the financial professions who serve them. Here, the industry veteran of 41 years talks about the changing political landscape, memorable moments in his career, and the future of the independent financial advice.
How it all began: “My career at Merrill Lynch as a producer and Branch Manager was an eye-opening experience. Merrill provided the level of sophistication needed to serve the investing public and the perspective to realize to do so properly required independence.”
On today’s regulatory environment: “The regulatory pressures to move our industry to a fiduciary standard is the most pressing and perhaps onerous issue coming out of Washington for our industry. As Hybrid or Commissioned Financial Advisors, I believe 99.9% currently operate as fiduciaries. However, proving you are functioning in the best interest of the client to the satisfaction of regulators in Washington with no real-world experience in the industry often has nothing to do with actually functioning in a fiduciary manner. It has everything to do with increasing the costs of providing service to clients and therefore often making it impossible to profitably deliver these services to middle-class clientele which disenfranchises the very constituency the regulators are charged to protect.”
His most memorable investor: “In 1999, I had a client named Miss Polly, who was a 73 year old widow living on Social Security, a small pension and the savings of a lifetime (a $10,000 CD and a previous $5,000 mutual fund investment, now worth $10,000). She came to my office to ask my advice concerning a recent call she had received from a coin dealer in New York. He spoke of the upcoming new year (Y2K) and the speculation that computers would stop working, the economy may collapse and, he postulated, the only sure repository of wealth was gold coins with numismatic value. She agreed to use the $20,000 from her CD and mutual fund to acquire this coin of great price.
When she began to have second thoughts about this transaction, she came to my office for advice.
I asked, ‘Don’t you use the interest from the CD and the dividends from the mutual fund to pay for your Medicare supplement?’
‘Yes,’ she replied.
‘And didn’t you intend for this mutual fund to be an inheritance to your grandchild?’ I continued.
‘Yes, that was my intent,’ she answered.
‘Then why would you buy a coin that you must pay to buy, pay to store, pay to sell, and which pays no dividends?’
She paused, then said, ‘Oh no! I wish I hadn’t told him I’d buy the coin.’
While Miss Polly sat in my office, we called the coin dealer in New York. I explained to him the purchase of this coin was not in her best interest and she would not be completing the acquisition. He threatened legal action. I added my attorney to the phone call. We spoke of verbal contracts, fiduciary responsibilities, Miss Polly’s health and wishes. After an extremely long two hours, we D/K’d the trade and Miss Polly hugged me and offered to pay for this “heroic effort.” I reminded her she does pay me for ongoing advice and service, it’s called a 12(b)1 fee and I receive about $25 per year from her mutual fund investment.”
View on the industry: “Independent financial advisors are an invaluable solution to the complexities of investing for millions of middle-class Americans. This is why it’s so important to get involved with FSI; I see a transition from the accumulation to the distribution of client assets is taking place now and it will accelerate for the next decade, and we need to be there to advocate for investors.”