Advisers give two thumbs down to movie about Stratton Oakmont

Jan 5, 2014 @ 12:01 am

By Jason Kephart

There is a lot of Oscar buzz around “The Wolf of Wall Street,” but the film, which chronicles the rise and fall of notorious broker Jordan Belfort, isn't likely to win any awards from financial advisers.

Mr. Belfort gained notoriety in the 1990s as the founder of Stratton Oakmont, a Long Island, N.Y., boiler room that aggressively pushed risky penny stocks on unsuspecting clients. Mr. Belfort was later found guilty of securities fraud tied to shady initial public offerings and spent 22 months in prison.

Of course, in the post-Bernard Madoff world, nothing about that story is particularly shocking.

“The Wolf of Wall Street” isn't the first movie based on Mr. Belfort's story. That distinction goes to 2000's “Boiler Room.”

But perhaps no other movie about finance since director Oliver Stone's 1987 film “Wall Street” comes packed with the star power of “The Wolf of Wall Street,” which was directed by Martin Scorsese and stars Leonardo DiCaprio as Mr. Belfort. On top of that, the film is pumped full of sex and drugs, so it isn't surprising that it is gaining a lot of attention.


For advisers, however, the movie could be bringing the wrong kind of attention about the business to clients.

“It shows the worst of retail brokerage,” industry recruiter Danny Sarch said.

“It doesn't help the industry by any stretch,” he said. “It's awful.”

In an early scene, for example, Mr. Belfort, who is just starting out his career as a broker, is having a three-martini lunch with a senior broker.

The senior broker tells Mr. Belfort “the name of the game: moving the money from the client's pocket to your pocket.”

A still-green Mr. Belfort replies: “But if you can make your clients money at the same time, it's advantageous to everyone, correct?”

The senior broker simply says, “No,” and the stage is set for nearly three hours of debauchery paid for by Mr. Belfort's clients, aka the victims of the firm's aggressive sales tactics.


“My biggest concern is that we'll all be painted with the same brush,” said Maryan Jaross, senior wealth manager at Gold Medal Waters Inc.

In addition, though those in the industry are aware of the differences between advisers and stockbrokers, the general public is still likely to see them as one and the same, said Christopher Van Slyke, a partner at WorthPointe.

“People can't tell the difference,” he said. “I struggle with the difference, and I'm in the business.”

“The Wolf of Wall Street” is creating even more of a headache for the industry because although the film seems like it could take place now, boiler rooms such as Stratton Oakmont are something of a relic.

“It's almost like historical fiction,” said Mark Coffey, a senior adviser at Summit Financial Strategies Inc. “It's a bygone era.”

The industry has in fact shifted, and is expected to continue to shift, toward a business model that aligns advisers' incentives with those of clients instead of the commission-driven sales that drove Mr. Belfort's firm.

Fee-based financial planning is on the rise across the industry, including at wirehouses, where it is expected to make up 70% of revenue this year, up from 58% in 2012, and regional broker-dealers, where it will make up 57% of revenue, up from 42%, according to Cogent Research.

Cogent also reported that the number of registered investment advisers, who act as fiduciaries for clients, grew at an annualized rate of 8% between 2004 and 2012, making it the only area of financial advice to expand during that time period.

The silver lining for advisers who may be worried about how the movie affects potential clients is that the graphic sex and drug scenes seem to have turned off a number of theatergoers. The film ranked a disappointing fifth in box office sales during its opening weekend.

Ironically, the No. 1 movie at the box office over that weekend was “The Hobbit: The Desolation of Smaug,” which features Bilbo Baggins, a protagonist who continually goes out of his way to help his friends — much like a good financial planner goes out of his or her way to help clients.

Maybe there is hope for the good guys yet.

Trevor Hunnicutt contributed to this story. Twitter: @jasonkephart


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