What is "Financial Sludge"?

By Burlington, Vermont Financial Advisor Hans Smith

"Financial Sludge" can be defined as the following:



By making the transfer process difficult, the company losing the assets hopes the client will give up. Instead of competing based on quality of product, service, or price, they protect their high-fee business models by using friction, also known as financial sludge.


Here are some "financial sludge" tactics that we see:

*Note: Not all of these financial sludge tactics are seen in every account.

  • Requiring paperwork that is confusing and difficult to fill out correctly.
  • Utilizing forms that are exceedingly long.
  • Failing to provide an easy way to obtain, submit, and track the transfer paperwork.
  • Requiring notarization, medallion signature guarantees, or a "spousal waiver."
  • Misleading clients about what they have been paying in fees (in particular, failing to mention revenue sharing/ commissions going on behind the scenes).
  • Tacking on various "lines of credit" to brokerage accounts - preventing the seamless transfer of assets without talking to your broker and filling out additional forms first.
  • Employing phone representatives that have a habit of providing incorrect forms, giving misleading statements, sending broken web links to withdrawal forms, and creating a high level of confusion.
  • Forcing clients, many of whom are at work and have limited time, through a long process of "save the client" sales pitches.
  • Forcing clients to call multiple times for the exit process to move forward - dropping the ball on the exit process in a way that is almost never done when a client is inbound.
  • Spooking clients into thinking there will be taxable implications if they transfer their funds out. Although an important consideration, this is often not the case.
  • Misnaming the registration on accounts and then refusing to release the account without copious paperwork.
  • Creating cross-ownership of accounts that is difficult to unwind.
  • Failing to provide clear account numbers and other identifying information, such as clear information regarding what firm actually holds the money (the custodian).
  • Taking months to process paperwork, often times rejecting it at the last minute due to an error created by unclear paperwork.
  • Imposing surrender charges related to annuities.
  • Imposing exit fees on accounts.

It can be frustrating and difficult to escape your high-fee firm. At One Day In July, we help clients fight through the financial sludge and move their assets into a low-cost diversified indexing strategy.

We hope this would not come to pass, but if you ever wanted to leave One Day In July, we would politely help you. It's your money and we respect it as such. If we cannot compete on our product, price, and service, we shouldn't be in business.


Written by Burlington, Vermont Financial Advisor Hans Smith


One Day In July LLC
77 College St. #3A
Burlington, VT 05401
How We Are Different
Low-fee index funds. Transparent & fiduciary financial advisors.
Local Financial Advisor
We are in your community We are local.
Investment Management
We tailor to each client. Index funds at the core.
Our Growth
Founded on a simple idea, growing fast.
Dan's Corner
Meaningful musings from our founder.
Fiduciary
Your best interests are our priority.
Low Fees
Our fees are among the lowest in the nation.
Financial Planner
Financial advisor optimizes your financial picture.
U.S. Treasury Bonds
Use Treasury Bonds to reduce risk.
Book Recommendations
Here are some of our favorites
Who We Serve
We work with clients nationwide from all financial backgrounds.
When Should I Invest?
Life transistions = important financial decisions.
Retirement: 401k and More
Retiring? Plan the future you want.
IRA Rollovers
401k Rollovers. IRA Rollovers
Active vs. Passive Investing
We believe there is a winner in this debate.
The Investment Process
How we work: low-cost index funds, personalized attention.
Simplicity
Simplicity is the ultimate sophistication.
Investing: What to Focus On
Low-fee index funds. fee-only advisor.
Switching Financial Advisors
Can be uncomfortable, but an important step.
Advisor Recruiting
We attract top-tier talent. Not your usual firm.
Basic Investing
Let's start with Investing 101.
Understanding Your Financial Statement
Let's break it down to basics.
Index Funds
Broad market exposure, low expense.
Behavioral Finance
Nudge vs. Sludge.
Advanced Investing
Let's geek out on stats and figures.
How Financial Firms Bill
Fee-based vs. fee-only, and lots more.
Who Supports Indexing?
Bogle, Swensen, Buffett, and others.
Transparency
One click to see our fees.
Mutual Funds vs ETFs
Clarifying the difference.
Does Stock Picking Work?
The resaerch says no.
Countering Arguments Against Index Funds
What happens in a down market?
Annuities
Lots of fees, little clarity.
How Do Mutual Funds Work?
Invest in the basket.
How to Relieve Financial Stress
New client? anxiety is normal.
Financial Terms Glossary
Common investment terms you should know.
Firm Comparison
One Day In July vs the competition.
Retired Investing
Retiring? Let us help.
Young Investors
Plant a seed, watch it grow.
High Net Worth Investors
Preserve and grow your wealth.
Investing an Inheritance
Prioritizing and planning for the future.
Widowed Investors
Managing money after a loss.
Female Investors
Your voice needs to be heard. We are listening.
For the Business Owner
Choosing what's best for your business.
Environmental Investing
Carbon intensity, fossil fuels.

Locations

Vermont

New Hampshire

Maryland

United States

Services

Individuals

401k Plans

Institutions

Environmental

Differentiators

Cash Flows

Low Fees

Fiduciary

Dedicated Advisor

Materials

Advisors: Join Us

Careers

Articles on Investing

About the Secure Act

Quarterly Booklets

Resources

Vermont Investment Management

Vermont Retirement Planning

Vermont Wealth Management

Vermont Financial Advisors

Investment Tools

Shelburne, VT Financial Advisor

Frank Koster | Josh Kruk

5247 Shelburne Rd, Suite #101

Shelburne, VT 05482

(802) 777-9768

Stowe, VT Finanical Advisor

Available for meetings in Stowe.

Steve Schleupner

(301) 514-4499

Burlington, VT Financial Advisor

Hans Smith | Katie Muttitt | Nancy Westbrook

77 College Street #3A

Burlington, VT 05401

(802) 503-8280

Portsmouth, NH Financial Advisor

Paul Barry

4 Market Street, 2nd Floor

Portsmouth, NH 03801

(603) 531-3773

Frederick, MD Financial Advisor

Available for meetings in Frederick.

Steve Schleupner

(301) 514-4499


Disclosures | © One Day In July LLC. All Rights Reserved.