Invest Skeptically

In a previous blog I mentioned the Ombudsman for Banking Services and Investments (OBSI) and decided to add a little more about them.

OBSI is funded by its participating firms — which is not unusual. But, an interesting note is that they focus only on “independent and impartial” dispute resolution which means they are not an advocate for consumers, nor are they a regulator with any teeth. Furthermore, their recommendations can only be made for amounts under $350,000.

The only case of a firm rejecting an OBSI recommendation, in its 11 year history, is the one of Financial Architects Inc. The firm put a 76 year old widow, living on a modest pension income, into higher risk equity mutual funds with deferred sales charges (to lock-in the money).

“OBSI found the investments unsuitable, the strategy ill-conceived and the record-keeping unhelpful” and recommended that the client receive compensation of $79,797. According to the release on the OBSI website, “Financial Architects Inc. took the position that the transactions were authorized by the client and were suitable for her investment objectives. The firm offered reimbursement of $248.50 in tax penalties for excess foreign content and $180.86 for DSC fees.” Scandalous!