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Zager Fixed Income Management: The popular financial advisory with grey deeds?

Zager Fixed Income Management Morgan Stanely is a popular name in the financial services market of Los Angeles. The firm makes boastful claims about its services and expertise. 

But the firm’s policies suggest it doesn’t put its clients ahead of its interests. In fact, they tell the opposite. 

Before you sign any agreements with this service provider, you should know about the shady or selfish provisions present in their disclosures. This way, you’d know what you’re getting into. 

About Zager Fixed Income Management Morgan Stanley

Zager Fixed Income Management is located in Los Angeles, California. The managing director of this firm is Drew Zager while the senior vice president at this firm is Joseph McCullough, CFA. 

Its office is located at 1999 Avenue of the Stars Suite 2400, Los Angeles, CA 90067, US and the contact number of the firm is 310-788-2130. Zager Fixed Income Management offers many financial advisory services to its clients including pre-liquidity planning, investment management, and risk management. 

Also, the firm claims to offer many advantages to its clients such as having tailored, high-grade, cash portfolios, dedicated fixed income managers, and providing direct access to the portfolio manager and the trading team. 

All of these highlights make this firm seem like an excellent choice for investors. However, their policies and professional history tell a different story. 

According to their disclosures, the firm’s policies put its clients at a huge disadvantage. I have discussed them in detail below to help you determine if you should trust them with your financial future: 

Issues in Zager Fixed Income Management You Must Know

$650,000 Conflict with a Client

Zager Fixed Income Management

The biggest red flag in trusting Drew Zager is the dispute present on his FINRA BrokerCheck profile. For those of you who don’t know, FINRA BrokerCheck is a database where you can find all the crucial information related to a fiduciary. This includes the educational qualifications, professional experience, and customer disputes an advisor has had. 

When you look up Drew Zager Morgan Stanley on FINRA BrokerCheck, you find one dispute listed on his profile. This dispute occurred in 2008. Here, the client alleged that his investment representative failed to follow his instructions by purchasing securities other than municipal bonds. However, the client didn’t specify the damages. 

FINRA BrokerCheck: Financial Industry Regulatory Authority is the self-regulatory organization which is responsible for member brokerage funds and market exchange.

The settlement amount of the conflict was $650,000. 

There’s a good chance that this dispute was related to the Lehman Brothers crisis. Trusting an advisor who has caused such humongous losses to his clients becomes very difficult. 

Keep in mind that many financial advisors avoid legal disputes by trapping their clients in shady agreements. Here are some of the additional red flags present in Drew’s services: 

Charging Performance-based Fees

Zager Fixed Income Management charges performance-based fees, which is a very notorious practice in the finance sector. Why is it notorious? Because it creates a compromising situation for the client. 

When your advisor charges performance-based fees, they earn only when they beat a specific benchmark. So it’s better for them to follow high-risk strategies. 

If a high-risk strategy works, it can yield you great returns. But if it fails, which it does in most cases hence the name “high-risk”, you’d lose a significant chunk of your invested capital. 

That’s why it’s best to avoid financial advisors who charge this fee. They would put you at excessive risk for no reason other than to make an extra buck. 

Selling Investments Instead of Recommending Them

Another drawback in working with this firm is that it’s a part of Morgan Stanley. Morgan Stanley has many proprietary investment products as well as securities which its affiliates underwrite. 

For Drew Zager and his firm, it would be more profitable for them to recommend (or sell) these investment products to their clients. It wouldn’t matter if the proprietary investment is suitable for your portfolio or not. 

That’s because such advisors rarely recommend investments that don’t offer them commissions. 

Before you trust a recommendation given by such an advisor, ask yourself this question, “Does he prioritize my financial interests over his?” 

Note that proprietary and affiliated products aren’t limited to simple investments. They can also be insurance products. That’s why you should be cautious of getting insurance from such advisors. Unnecessary insurance increases your costs and offers no benefits. 

Using Clients’ Funds for Personal Gain

This is a particularly dangerous issue for ultra-high-net-worth clients including both individuals and institutions. Zager Fixed Income Management can trade the investments they recommend to their clients. 

This leads to various conflicts of interest like the previous issues. However, in this case, the advisor can use the large capital of their clients to manipulate the behavior of certain investments and get the returns they desire for themselves. 

While earning from commissions can affect the recommendations an advisor makes, trading recommended securities affects the long-term financial plans they develop for a client. 

For example, Zager Fixed Income Management can trade a specific investment before recommending it to you. They might short sell an investment and make you sell the same to make profits. This might be a very basic example of how fiduciaries can use their clients’ funds for their personal profits but I hope you get the idea. 

That’s why you should ask your financial advisor what investments they trade for themselves before trusting their recommendations. 

Zager Fixed Income Review: Conclusion

Zager Fixed Income Management of Morgan Stanley is not a firm you can trust. They have a ton of red flags which suggest it’s best to avoid them. From charging performance-based fees to selling investments for commissions, they have too many issues to count. Don’t forget the $650,000 dispute Drew Zager had with his client in 2008. 

Instead of working with Drew Zager and his firm, it would be more suitable for you to find a smaller firm which puts most of its emphasis on honesty and transparency. 

2.6Expert Score

Drew Zager and his firm are running a dangerous operation where they put their clients in unfavorable situations through their shady terms and conditions. It would be best for you to avoid this financial advisor and find someone else.

Concern for Clients
  • None
  • $650,000 dispute with a client
  • Charge 12b-1 fees
  • Using clients' funds for personal gain

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