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Scott Thomas, ChFC®, CAP®, CKA®, RICP®

Cut Out the Middle Man or Disintermediation

Disintermediation, in finance, is the withdrawal of funds from bank, to invest them directly. Generally, disintermediation is the process of removing middleman or intermediary from future transactions. Disintermediation is usually done to invest in instruments yielding a higher return. Buy US Treasury direct instead of getting lower rates on money market funds and savings.

Example: $2,000,000 in cash invested with local banker and earns .15% the banks rate for cash savings and money market accounts for all customers.  The bank invests the money in US Treasury guaranteed or fully back by government and no risk at 2.2% gross rate.  The trading department takes .6% for trades and management and then nets 1.6% for the bank and the branch gets credits towards salaries and expenses and profits in the amount of 1.45% netting .15% or $3,000 for the year on $2 million and all the others in bank and trading received $37,000 in credits and compensation.

Does it sound like your banker is acting as a Fiduciary?

Would you rather see the whole $40,000 go to the programs and those your serve?

Investments and insurance have had several transparency events over recent years and continue to deal with Fiduciary Standards I believe cannot come too quickly.

Check the background of this financial professional on FINRA's BrokerCheck
Check the background of this financial professional on FINRA's BrokerCheck