Monday’s Headlines: When It Comes to Investing, Wall Street Pros Don't Follow Their Own Advice

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It looks like a case of "don't do what I do; do what I say." When it comes to their own finances, turns out bankers can be lousy investors. According to a Bloomberg story today, employees at the five biggest Wall Street banks saw the value of their company’s stock holdings in their own 401(k) plans plummet by $2 billion in 2011, not including bonuses. Quips the wire: “Wall Street employees, who dispense financial advice to individuals and companies, aren’t following a basic investing tenet with their own money: diversification.”

While a third of companies surveyed by Vanguard said they capped the amount of company stock individual employees could hold in their company-sponsored portfolios, Goldman was the only Wall Street firm to impose such a restriction, at 20 percent. Vanguard considers anything above 20 percent to be excessively risky. At the Big Five, the percent of company-held stock by employees at the end of 2010 was such:

  • Morgan Stanley: 24 percent
  • J.P. Morgan: 18 percent
  • Bank of America: 13 percent
  • Citi: 8 percent
  • Goldman: 2 percent
  • U.S. workers who had an option to buy company stock: 13.47 percent (down from 22.4 percent in 2006)

Morgan Stanley has a unique program in which it matches retirement contributions with company shares one-for-one up to $9,800. The company is facing an employee lawsuit regarding the matter.


Other News:

J.P. Morgan, BlackRock and Goldman close money market funds after EBC rates are cut to zero. [Financial Times]

Barclays is considering listing the investment bank separately. [Bloomberg]

The wealthy are returning to hedge funds. [Financial Times]

Normura is losing deals in the face of its insider-trading scandal. [WSJ]

Thomson Reuters will buy FX Alliance for $625 million. [WSJ]

MBA students turn to alumni to finance degrees. [Businessweek]

The SEC approved the NYSE’s “dark pool” proposal. [DealBook]

Deutsche Bank faces lawsuit over Libor fixing. [Bloomberg]

FBI says Mexican drug cartel used Bank of America to launder money. [Bloomberg]