This report strikes close to home, as JPMorgan is a major player in the Miami market and, with many other financial institutions, actively solicits our partners for client referrals and for appointments as a corporate trustee in the estate planning documents we prepare for our clients.
Most major trust companies and banks with trust divisions have their own "captive" mutual funds. Recently, a client appointed Fiduciary Trust Company as its investment advisor. The people at the local office are top people and we like them. FTC is a subsidiary of the Franklin Templeton Group. They bent over backwards to tell us that FTC will invest clients funds in the Franklin Templeton Group family only if they are equal or superior in all respects to other non-Franklin Templeton funds. The client will be watching that carefully. Obviously, there is a huge conflict of interest here. Frankly, if I were running FTC I would not as a matter of policy invest in Franklin Templeton mutual funds. This practice of banks and trust companies is so endemic to that industry that it seems "normal" to most people.
Although the client chose FTC, it did not put all its funds there. It divided its portfolio bewteen FTC and an "indexer," an independent investment company. This independent company has no mutual funds of its own. Instead it invests in low-cost index funds, and insists that it gets no kick-back from those funds for investing in them. Its fees are based on the overall size of the portfolio. It will be interesting for the client (and us) to see how the two managers compare in performance.
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