Coach Pete - A Closer Look at Conflicts of Interest

If you listen to Triangle area radio you’ve almost certainly heard advertisements for Coach Pete, Capital Financial or the Financial Safari show. We’ve previously outlined Coach Pete’s promotion of being a fiduciary advisor, and how upon further examination Coach Pete wears two hats – sometimes conducting business as a registered investment advisor (fiduciary) and other times working as a commission insurance salesperson (most certainly NOT a fiduciary).

Let’s peel the onion on Coach Pete’s conflicts of interest. Pages 7&8 of Capital Financial Advisory Group’s form ADV highlights a variety of conflicts of interest. For example, Capital Financial has solicitor agreements with three investment managers, which provide compensation to Capital Financial via a revenue-sharing agreement. Here’s how it works: Coach Pete may recommend XYZ investment firm to manage investments for client. YYZ charges the client 2% of the assets under management, which on a $500,000 portfolio equals $10,000 / year. XYZ in turn pays a portion of this revenue to Coach Pete for referring the client to them.

The problem with such an arrangement is that it seems very unlikely that Coach Pete would recommend any investment managers that do not engage in revenue-sharing arrangements with him (like Vanguard or Dimensional Fund Advisors, for example).

For a closer look at Coach Pete’s conflicts of interest we suggest reading page 11 of the Capital Financial form ADV.

Unfortunately, securities regulators have allowed some advisors to have their cake and eat it too by allowing those serving in a fiduciary role to merely disclose conflicts of interest rather than avoid them altogether. Operating in a world where product A pays the advisor 8% and product B pays the advisor 2%, with the only obligation a disclosure (“lower fees for comparable services may be available from other sources”) buried on Page 9 of the ADV hardly seems to be in the client’s best interest.

We believe a better approach is to seek a fee-only advisor, one who takes no commission compensation whatsoever.

Schedule a 15-minute Introductory Call to learn more about how we differentiate from Coach Pete.