Correction: This article originally attributed “smug bearded guy” commercials to Raymond James. Those commercials are sponsored by TD Ameritrade. I regret the error. – Dan Solin
As Josh Brown notes in this blog post, when it comes to investing, you’re on your own.
The Consumer Financial Protection Bureau has been gutted.
The fiduciary rule is on its deathbed. Brown correctly notes: The story being told is that forcing investment professionals to act in the best interests of their customers and remove obvious conflicts is somehow antithetical to “choice” or will shut people out from getting advice. This is, of course, the most horrendous lie on Wall Street.
It’s much worse.
Wall Street is a massive wealth transfer scheme, transferring wealth from you (who earned it) to those who “manage” it.
The return of the average investor hasn’t even kept up with inflation.
It turns out the smug bearded guy featured in the TD Ameritrade commercials doesn’t have a clue about sound and responsible investing, based on solid academic evidence.
Brokers are great at sales. They particularly excel at persuading you to purchase complex, high commission products, likely to underperform a simple index fund.
When’s the last time your broker told you that buying individual stocks made no sense because it’s just too risky, compared to readily available alternatives?
Or that forecasters have no skill, beyond what you would expect from random chance?
Or that the performance of hedge funds has delivered “miserable results for investors”, while bestowing incredible wealth on those who manage them?
Or that much of the financial media is in the pocket of the securities industry, and provides a daily grist of misinformation, likely to cause immeasurable harm to those who pay attention to it.
If you’re assuming you can get sound advice from those who have conflicts of interest, which they resolve in their favor, you’re in for a rude awakening.
Resource of the week:
This blog post by Craig Buckhout nicely describes how the financial media causes investors harm.