How Broken Is The Financial Services Industry?

Today on my blog I have a post up that takes a run at the active/passive debate. Building on that discussion is an email I received from a friend who works in the business. He read my greenfaucet post from last week called Taleb’s Number Nine.

My friend’s money quote; Wall Street does more harm for investors than good.

Ouch. He is certainly mostly right and perhaps entirely so. His context is the entire industry as opposed to the brokers although some of them are part of the problem as well. To be fair, and I do believe this, there are plenty of RIA’s that are part of the problem too.

No matter how you access the markets there will be pros and cons and anyone should understand both sides of the ledger for whatever path they choose. This is not a blanket call for hiring someone or not, going active or passive, fundamental or technical or any other means of participation. Some folks should hire someone, some folks should not own individual stocks and some folks should just stick with annuities. They all have positives and negatives.

As a side note I have never been a fan of annuities but I used to say “I know several people who have everything in them and think they’re great.” Then when the AIG started to implode those same folks had the scare of their financial lives.

If you hire someone you need to still be engaged on some level. Obviously I try to keep clients engaged with the writing and by sending email. If you do it all yourself I think you need to be very proactive with trying to learn more about markets, products and current events – this does not have to mean 40 hours a week of study but maybe some effort.

It might be a mistake to expect the industry to ever change. If that turns out to be correct then the onus of proactively getting involved because a responsibility to ourselves.

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