8 ms·

Fiduciary Rule Fight Brews While Bad Financial Advisers Multiply

95 points by clumsysmurf 9y ago

pmiller2 9y ago
The article mentions Wealthfront and Betterment as alternatives to traditional advisors and their heavy fees. But, honestly, the vast majority people don't even need to pay the 0.25% they charge. Just get yourself a Vanguard account and follow the advice here: https://www.reddit.com/r/personalfinance/wiki/investing https://www.reddit.com/r/personalfinance/wiki/investing The advice there, and in the rest of that wiki, will serve you very well, at least until you have many millions of dollars.
- frgtpsswrdlame 9y ago
  Worth mentioning that Charles Schwab also has some etfs with extremely low expense ratios.
  - loeg 9y ago
    As does Fidelity, but at the end of the day, neither is structured in a way that ensures that continues. Vanguard is mutually owned.
  - kobeya 9y ago
    Why use the ETFs? You're paying spread and front-runners, and have to deal with cumbersome atomic shares. Use the very excellent underlying mutual funds that are free to trade on Schwab's platform.
- jmcgough 9y ago
  I wonder how much of the 0.25% is recouped by wealthfront's tax loss harvesting.
  - ericd 9y ago
    The problem with TLH as justification is that with assets with a positive EV (and because of inflation), after 5-10 years, you probably won't have many losses to harvest, but you'll still be paying that fee.
    - loeg 9y ago
      The main problem is that TLH tops out at $3,000/yr in losses. After that the benefit doesn't scale with the fee.
      - tgjsrkghruksd 9y ago
        The main problem is that TLH is irrelevant in tax-free/deferred retirement funds, which is where you should be sticking your savings if you haven't maxed them out, which is the situation of most people who use these robo services.
        mendelk 9y ago
        Yet another problem of TLH is that you must have all your investments with Betterment to ensure you don't trigger the "wash sale" rule. (Alternatively, you can handle it yourself manually, but that negates most of the benefit of having Betterment from a TLH perspective.)
    - deleted 9y ago
      [deleted]
    - rphlx 9y ago
      That's more or less true only if you are retired & not re-investing dividends (not regularly purchasing new, high-basis lots). The key problem is the one that loeg mentioned: on a $500k+ account you will likely be paying >$1k in fees for a ~$1k/yr tax savings. To make matters worse, the tax savings does not increase with inflation, but the fees do.
      - 9y ago
- kevstev 9y ago
  Wealthfront and Betterment fit the population of people that honestly don't even want to read that wiki and just want someone else to deal with it. That population is a lot larger than you think- I don't have the statistics handy, but a very large % of people just have their 401k funds sitting in cash. And even for slightly more knowledgeable people, they are happy to have a middle ground of a company that at least does an annual checkup to make sure their portfolio makes sense while avoiding a sleazy broker type. You are right that you can just read that wiki, but a lot of people just aren't want to and are willing to pay a fee to avoid it.
pg_bot 9y ago
Unless your principal is in the seven figures your best bet is likely an index fund. More and more people are waking up to high fees and lackluster results of these advisors. If I were to offer advice, go with vanguard. They have the lowest fees in the industry and have an ownership structure that benefits the shareholders of its funds.
- readams 9y ago
  What changes when your principal is in the 7 figures?
  - BadassFractal 9y ago
    I second that question.
    - powera 9y ago
      At a certain point, you have to run the company. Mark Zuckerberg couldn't sell $40 billion of Facebook stock and put it all in a Vanguard mutual fund.
      - dkural 9y ago
        Actually he could. Vanguard would easily absorb it. Vanguard has about 4 trillion dollars of assets under management. $40B corresponds to about 1% of it, about a single day's stock market wiggle.
        pmiller2 9y ago
        Selling that much FB stock would put a pretty big dent in the stock price.
        loeg 9y ago
        Sure, but that's an extreme example. Zuckerberg's at 10 figures, not 7.
BadassFractal 9y ago
Let's say you had a successful exit and now have a bunch of stock or cash on your hands. What do you do to both protect your assets and possibly grow them without getting too aggressive because you want to retire on that lump of money? Looks like fiduciary duty advisers cannot be trusted. Some claim that index funds such as vanguard are also not guaranteed to continue being a safe bet once everybody and their dog switches to them vs managed funds. What else is left to do?
- wayn3 9y ago
  you go to a private banker in a jurisdiction whose sole job it is to do private banking and get that shit private banked. dont pretend you dont know which country im talking about. thats a really simple problem with a known solution. its just not advertised at all. everyone above a couple mil gets 10-15% annually and just doesnt talk about it to average randos. because instead of listening they always start shouting matches about how its so unfair that normal people dont have access to this stuff and taxes and tax evasion and all the lowlife hate thats inevitably going to happen.
  - BadassFractal 9y ago
    Why wouldn't private bankers be as predatory of high net worth individuals as other financial professions are of normal folk? How does having a couple of mil protect you from being taken advantage of by charlatans? Don't the rich fall for dumb schemes the same was everybody else?
    - wayn3 9y ago
      Private banking, in said jurisdiction, is a line of work with centuries of tradition. And they just don't have any fucking reason to fuck over their clients. Protection? If you are a billionaire and your banker fucks you over, I think they're more scared of you than you are of them. I did not tell you to private bank with bank of america new york city. If you do that, kiss your money goodbye. They'll take all of it, funnel it into the next garbage scheme and yell "stakeholders".
    - deleted 9y ago
iopq 9y ago
I started with Wealthfront and Betterment, but honestly I could just buy some mutual funds at Vanguard and pay 4 or 5 basis points in fees instead 25 (and then the same 4 or 5 basis points for what they buy).
- JBReefer 9y ago
  ETFs are free to trade on Vanguard, but you can't buy fractional shares and there's slight differences in how values are calculated.
  - iopq 9y ago
    Sure, if you buy VTI, for example. If you want to buy fractional shares, you can buy VTSAX which is a mutual fund. You can buy both of them for free from Vanguard and they both have 0.04% expense ratios.
lettergram 9y ago
So, I used to write on a blog called topfinancialadvisor.com (not for a couple years). It was kind of funny, when researching for the blog, we found countless articles all copied from bloomberg.com, forbes.com, usanews, cbs, msnbc, etc. They all had the same basic story, which barely told anyone anything, and at the end had some sort of popup to "get your financial advice." It was clear the whole things was just an add from the start, just trying to get high in the google rankings. And, that's pretty much how I feel about every financial adviser. It's a gimmick to collect fees. It doesn't take a genius to make money on the stock market, or invest in a property. The key is to diversify and invest in solid teams / products. The same things Warren Buffet looks for in a company, is literally almost the exact same thing YC looks for in a startup. It's a solid team, good management, vision, and a solid product (preferably with solid sales); and only trade what you know. That being said, (a bit of a shameless plug here) that's part of the reason I'm writing my own financial adviser (https://projectpiglet.com/ https://projectpiglet.com/ currently being alpha tested). The idea being, use what other people know, to help trade the market. I fully intend to just charge a flat monthly fee, and provide other services as well, for your own research. Basically, explain the whole process of why you should buy X, then let you make the decision. This (I felt) was much more honest, and although it might cost me more money initial, building trust will eventually benefit long term IMO. Plus, it has the added benefit of (if it ever takes off) optimizing investment towards solid products / teams, as opposed to shady financials as CFA do. The CFA's I speak to about this, drive me absolutely nuts. They think I should either (a) just look at the companies financials and that's it, or (b) try to talk me down, then try to sell me their services (claiming they can do better). The best part, is when I show them my portfolio -_-
- pmiller2 9y ago
  How do you use Project Piglet to inform your investing decisions? The examples don't seem very enlightening. I'm slightly confused that it's registering a positive sentiment for Uber, too.
  - lettergram 9y ago
    Yeah, we are working on an improved demo (along with transitioning the stock advisor from python to our web app). I personally use it to identify how experts feel about a given product, then compare to what the main stream media things + the stock market. One of the most interesting examples of this, was I saw a spike of positive sentiment regarding AMD in early 2016. I then invested some money because the experts felt their new architecture could compete with Intel. That sentiment just continued to build until release, at which point I held a ton of stock. As for Uber, believe it or not, there actually is a ton of positive sentiment. Even though there is a lot of negative discussion here on HN generally, it targets "experts" i.e. people who appear to discuss uber in depth and/or have insider knowledge. Those people believe uber is doing relatively well (at least in 2016 - the demo data). Now, it's a bit more mixed when looking at sentiment, with a solid negative net promoter score[1]. [1] http://www.medallia.com/net-promoter-score/ http://www.medallia.com/net-promoter-score/
jeffdavis 9y ago
Doctors and lawyers do have conflicts of interest, too, and it's really hard to keep them in check. Financial advisers have an even more direct conflict of interest -- your loss is literally their gain. Doctors' conflicts are probably the least direct and easiest to fix of the three. Financial advisers are hopeless, as far as I'm concerned.
- toufka 9y ago
  This is precisely why both doctors and attorneys are considered 'professions' - as they both have articulated professional obligations that are primary to their making money. They both have duties of either care, or of law to their client, even and especially when those duties conflict with them making more money. If you chose the more money of standard of care, or more money over the client's interest, you lose your professional license. In the context of a financial advisor, that duty should be fiduciary in nature, but as there is no professional obligation, no recourse for failure to keep that obligation, you have a race to the bottom.
- kobeya 9y ago
  Fee-based financial advisors are a thing, and directly solves the incentive problem. There's also the possibility of making sure most of the advisor's income comes from bonuses based on alpha.
cko 9y ago
Here's what bothers me. Ten years ago I was still in school and came across Malkiel's 'A Random Walk' book. Then I started reading Graham's 'Intelligent Investor' and was like "dude I'm not going to spend hours a day trying to potentially beat the market by 2%. lol I'm not Peter Lynch". I concluded that if I wanted to park my money somewhere, it would be all in Vanguard index funds. Now, it's 2017, and everyone has the hots for these products. Feels like a bubble. I've always had this possibly irrational feeling that if everyone is recommending something, I should probably look into alternatives. Since I graduated and started working in 2010 all my dollars went into rental real estate, but recently I get jealous of how low-maintenance (mentally) having these shares of index funds is, and I dream about getting qualified dividend income and capital gains. Can anyone offer a viewpoint on this? Am I being irrational? All my life I've been doing stuff differently from everyone and it's worked out pretty well. Meanwhile had I started buying up these funds I'd probably have the same exact networth as I do now. What other passive options are out there? Dividend aristocrats? I also entertained buying AAPL and Wells Fargo and 3M and putting the rest in a Vanguard small cap index. shrugs
- uiri 9y ago
  Conventionally, when bond yields go down, stocks go up. Interest rates (and, consequently, bond yields) have been very low for a number of years now. This has led to a lot of capital being deployed in the stock market instead. So that explains why there is a lot of money which wants to be invested in the stock market right now. This may or may not be tempered by a near-future hike in interest rates. Vanguard started out in 1975 but it only had one fund - a mutual fund tracking the S&P 500 - for the first decade of its existence. It has added new funds since the crash of 1987. If you look at the market since that time, the dot-com bubble was for tech stocks specifically and the housing bubble didn't have much to do with stocks at all (until after it burst, anyways). There hasn't been demand for the entire stock market since Vanguard started to become popular and well-known. This is why demand for index funds is near an all-time high. Throwing everything into Vanguard isn't a bad idea. Buying AAPL, WFC, MMM and VBR (or similar) is not a bad idea. Dividend aristocrats isn't a bad idea. You can come close to replicating market performance with a small subsection of the market. If you have good returns from your rental real estate, keep it. Or rather, keep at least some of it for diversification. I too have a thing for contrarianism but I think that some stock strategy is worth pursuing. The people whose portfolios do best are those who forget about them[0] [0] http://www.businessinsider.com/forgetful-investors-performed-best-2014-9 http://www.businessinsider.com/forgetful-investors-performed...
ars 9y ago
Why do I have a feeling that some disclosure law is not going to suddenly make people not be greedy? It's one of those laws that make it look like you did something, while doing nothing. The new government is right to get rid of it - it's pointless and will help nobody. Now if you made a law that made commissions completely illegal (in finance, insurance, and other similar areas) - that would do something.
- zaidf 9y ago
  The point of a law is two folds: (1) to act as a deterrent (2) when violated and the violator is caught, to have an avenue to prosecute them (and provide some form of justice.) Even if you're completely right (I don't believe you are) and the law doesn't deter ANYONE from committing the crime, its second purpose still has value. Laws against homicide, robbery etc. haven't resulted in 0 homicides and robbery; and yet, they have been used to prosecute people who have committed those crimes. If those laws didn't exist, murder and robbery would not be against the law. We can argue all day if the law has done much to deter those things but it's a fact that the law helps in delivering justice. Without the law, it would be legal to murder someone and face zero legal consequences.
  - ars 9y ago
    That would be true if law would actually be used to prosecute anyone. But it won't. The criteria are nebulous "must pick the best product". The advisor will just say "I believed this one was the best". How are you going to prove that? On top of that, victims don't typically even know if the advisor was wrong! So they'll never even take him to court. Plus it's a civil matter, meaning it costs the clients lots of money to bring a case. It will not have the effect you describe. Are there are requirements for review of advisors? That their advice goes to some panel for review? That the panel would have the power to actually arrest them if they disagree? It does not. It's a pointless law.
- MarkMc 9y ago
  How do you feel about a similar law for real estate agents? That is, the agent must act in the interest of the seller and cannot accept money from a buyer. Or a law that says lawyers must act in the interest of their clients?

95 points by clumsysmurf 9y ago

The article mentions Wealthfront and Betterment as alternatives to traditional advisors and their heavy fees. But, honestly, the vast majority people don't even need to pay the 0.25% they charge. Just get yourself a Vanguard account and follow the advice here: https://www.reddit.com/r/personalfinance/wiki/investing https://www.reddit.com/r/personalfinance/wiki/investing The advice there, and in the rest of that wiki, will serve you very well, at least until you have many millions of dollars.

frgtpsswrdlame 9y ago
Worth mentioning that Charles Schwab also has some etfs with extremely low expense ratios.
- loeg 9y ago
  As does Fidelity, but at the end of the day, neither is structured in a way that ensures that continues. Vanguard is mutually owned.
- kobeya 9y ago
  Why use the ETFs? You're paying spread and front-runners, and have to deal with cumbersome atomic shares. Use the very excellent underlying mutual funds that are free to trade on Schwab's platform.
jmcgough 9y ago
I wonder how much of the 0.25% is recouped by wealthfront's tax loss harvesting.
- ericd 9y ago
  The problem with TLH as justification is that with assets with a positive EV (and because of inflation), after 5-10 years, you probably won't have many losses to harvest, but you'll still be paying that fee.
  - loeg 9y ago
    The main problem is that TLH tops out at $3,000/yr in losses. After that the benefit doesn't scale with the fee.
    - tgjsrkghruksd 9y ago
      The main problem is that TLH is irrelevant in tax-free/deferred retirement funds, which is where you should be sticking your savings if you haven't maxed them out, which is the situation of most people who use these robo services.
      - mendelk 9y ago
        Yet another problem of TLH is that you must have all your investments with Betterment to ensure you don't trigger the "wash sale" rule. (Alternatively, you can handle it yourself manually, but that negates most of the benefit of having Betterment from a TLH perspective.)
  - deleted 9y ago
    [deleted]
  - rphlx 9y ago
    That's more or less true only if you are retired & not re-investing dividends (not regularly purchasing new, high-basis lots). The key problem is the one that loeg mentioned: on a $500k+ account you will likely be paying >$1k in fees for a ~$1k/yr tax savings. To make matters worse, the tax savings does not increase with inflation, but the fees do.
    - 9y ago
kevstev 9y ago
Wealthfront and Betterment fit the population of people that honestly don't even want to read that wiki and just want someone else to deal with it. That population is a lot larger than you think- I don't have the statistics handy, but a very large % of people just have their 401k funds sitting in cash. And even for slightly more knowledgeable people, they are happy to have a middle ground of a company that at least does an annual checkup to make sure their portfolio makes sense while avoiding a sleazy broker type. You are right that you can just read that wiki, but a lot of people just aren't want to and are willing to pay a fee to avoid it.

pg_bot 9y ago

Unless your principal is in the seven figures your best bet is likely an index fund. More and more people are waking up to high fees and lackluster results of these advisors. If I were to offer advice, go with vanguard. They have the lowest fees in the industry and have an ownership structure that benefits the shareholders of its funds.

readams 9y ago
What changes when your principal is in the 7 figures?
- BadassFractal 9y ago
  I second that question.
  - powera 9y ago
    At a certain point, you have to run the company. Mark Zuckerberg couldn't sell $40 billion of Facebook stock and put it all in a Vanguard mutual fund.
    - dkural 9y ago
      Actually he could. Vanguard would easily absorb it. Vanguard has about 4 trillion dollars of assets under management. $40B corresponds to about 1% of it, about a single day's stock market wiggle.
      - pmiller2 9y ago
        Selling that much FB stock would put a pretty big dent in the stock price.
        loeg 9y ago
        Sure, but that's an extreme example. Zuckerberg's at 10 figures, not 7.

BadassFractal 9y ago

Let's say you had a successful exit and now have a bunch of stock or cash on your hands. What do you do to both protect your assets and possibly grow them without getting too aggressive because you want to retire on that lump of money? Looks like fiduciary duty advisers cannot be trusted. Some claim that index funds such as vanguard are also not guaranteed to continue being a safe bet once everybody and their dog switches to them vs managed funds. What else is left to do?

wayn3 9y ago
you go to a private banker in a jurisdiction whose sole job it is to do private banking and get that shit private banked. dont pretend you dont know which country im talking about. thats a really simple problem with a known solution. its just not advertised at all. everyone above a couple mil gets 10-15% annually and just doesnt talk about it to average randos. because instead of listening they always start shouting matches about how its so unfair that normal people dont have access to this stuff and taxes and tax evasion and all the lowlife hate thats inevitably going to happen.
- BadassFractal 9y ago
  Why wouldn't private bankers be as predatory of high net worth individuals as other financial professions are of normal folk? How does having a couple of mil protect you from being taken advantage of by charlatans? Don't the rich fall for dumb schemes the same was everybody else?
  - wayn3 9y ago
    Private banking, in said jurisdiction, is a line of work with centuries of tradition. And they just don't have any fucking reason to fuck over their clients. Protection? If you are a billionaire and your banker fucks you over, I think they're more scared of you than you are of them. I did not tell you to private bank with bank of america new york city. If you do that, kiss your money goodbye. They'll take all of it, funnel it into the next garbage scheme and yell "stakeholders".
  - deleted 9y ago

iopq 9y ago

I started with Wealthfront and Betterment, but honestly I could just buy some mutual funds at Vanguard and pay 4 or 5 basis points in fees instead 25 (and then the same 4 or 5 basis points for what they buy).

JBReefer 9y ago
ETFs are free to trade on Vanguard, but you can't buy fractional shares and there's slight differences in how values are calculated.
- iopq 9y ago
  Sure, if you buy VTI, for example. If you want to buy fractional shares, you can buy VTSAX which is a mutual fund. You can buy both of them for free from Vanguard and they both have 0.04% expense ratios.

lettergram 9y ago

So, I used to write on a blog called topfinancialadvisor.com (not for a couple years). It was kind of funny, when researching for the blog, we found countless articles all copied from bloomberg.com, forbes.com, usanews, cbs, msnbc, etc. They all had the same basic story, which barely told anyone anything, and at the end had some sort of popup to "get your financial advice." It was clear the whole things was just an add from the start, just trying to get high in the google rankings. And, that's pretty much how I feel about every financial adviser. It's a gimmick to collect fees. It doesn't take a genius to make money on the stock market, or invest in a property. The key is to diversify and invest in solid teams / products. The same things Warren Buffet looks for in a company, is literally almost the exact same thing YC looks for in a startup. It's a solid team, good management, vision, and a solid product (preferably with solid sales); and only trade what you know. That being said, (a bit of a shameless plug here) that's part of the reason I'm writing my own financial adviser (https://projectpiglet.com/ https://projectpiglet.com/ currently being alpha tested). The idea being, use what other people know, to help trade the market. I fully intend to just charge a flat monthly fee, and provide other services as well, for your own research. Basically, explain the whole process of why you should buy X, then let you make the decision. This (I felt) was much more honest, and although it might cost me more money initial, building trust will eventually benefit long term IMO. Plus, it has the added benefit of (if it ever takes off) optimizing investment towards solid products / teams, as opposed to shady financials as CFA do. The CFA's I speak to about this, drive me absolutely nuts. They think I should either (a) just look at the companies financials and that's it, or (b) try to talk me down, then try to sell me their services (claiming they can do better). The best part, is when I show them my portfolio -_-

pmiller2 9y ago
How do you use Project Piglet to inform your investing decisions? The examples don't seem very enlightening. I'm slightly confused that it's registering a positive sentiment for Uber, too.
- lettergram 9y ago
  Yeah, we are working on an improved demo (along with transitioning the stock advisor from python to our web app). I personally use it to identify how experts feel about a given product, then compare to what the main stream media things + the stock market. One of the most interesting examples of this, was I saw a spike of positive sentiment regarding AMD in early 2016. I then invested some money because the experts felt their new architecture could compete with Intel. That sentiment just continued to build until release, at which point I held a ton of stock. As for Uber, believe it or not, there actually is a ton of positive sentiment. Even though there is a lot of negative discussion here on HN generally, it targets "experts" i.e. people who appear to discuss uber in depth and/or have insider knowledge. Those people believe uber is doing relatively well (at least in 2016 - the demo data). Now, it's a bit more mixed when looking at sentiment, with a solid negative net promoter score[1]. [1] http://www.medallia.com/net-promoter-score/ http://www.medallia.com/net-promoter-score/

jeffdavis 9y ago

Doctors and lawyers do have conflicts of interest, too, and it's really hard to keep them in check. Financial advisers have an even more direct conflict of interest -- your loss is literally their gain. Doctors' conflicts are probably the least direct and easiest to fix of the three. Financial advisers are hopeless, as far as I'm concerned.

toufka 9y ago
This is precisely why both doctors and attorneys are considered 'professions' - as they both have articulated professional obligations that are primary to their making money. They both have duties of either care, or of law to their client, even and especially when those duties conflict with them making more money. If you chose the more money of standard of care, or more money over the client's interest, you lose your professional license. In the context of a financial advisor, that duty should be fiduciary in nature, but as there is no professional obligation, no recourse for failure to keep that obligation, you have a race to the bottom.
kobeya 9y ago
Fee-based financial advisors are a thing, and directly solves the incentive problem. There's also the possibility of making sure most of the advisor's income comes from bonuses based on alpha.

cko 9y ago

Here's what bothers me. Ten years ago I was still in school and came across Malkiel's 'A Random Walk' book. Then I started reading Graham's 'Intelligent Investor' and was like "dude I'm not going to spend hours a day trying to potentially beat the market by 2%. lol I'm not Peter Lynch". I concluded that if I wanted to park my money somewhere, it would be all in Vanguard index funds. Now, it's 2017, and everyone has the hots for these products. Feels like a bubble. I've always had this possibly irrational feeling that if everyone is recommending something, I should probably look into alternatives. Since I graduated and started working in 2010 all my dollars went into rental real estate, but recently I get jealous of how low-maintenance (mentally) having these shares of index funds is, and I dream about getting qualified dividend income and capital gains. Can anyone offer a viewpoint on this? Am I being irrational? All my life I've been doing stuff differently from everyone and it's worked out pretty well. Meanwhile had I started buying up these funds I'd probably have the same exact networth as I do now. What other passive options are out there? Dividend aristocrats? I also entertained buying AAPL and Wells Fargo and 3M and putting the rest in a Vanguard small cap index. shrugs

uiri 9y ago
Conventionally, when bond yields go down, stocks go up. Interest rates (and, consequently, bond yields) have been very low for a number of years now. This has led to a lot of capital being deployed in the stock market instead. So that explains why there is a lot of money which wants to be invested in the stock market right now. This may or may not be tempered by a near-future hike in interest rates. Vanguard started out in 1975 but it only had one fund - a mutual fund tracking the S&P 500 - for the first decade of its existence. It has added new funds since the crash of 1987. If you look at the market since that time, the dot-com bubble was for tech stocks specifically and the housing bubble didn't have much to do with stocks at all (until after it burst, anyways). There hasn't been demand for the entire stock market since Vanguard started to become popular and well-known. This is why demand for index funds is near an all-time high. Throwing everything into Vanguard isn't a bad idea. Buying AAPL, WFC, MMM and VBR (or similar) is not a bad idea. Dividend aristocrats isn't a bad idea. You can come close to replicating market performance with a small subsection of the market. If you have good returns from your rental real estate, keep it. Or rather, keep at least some of it for diversification. I too have a thing for contrarianism but I think that some stock strategy is worth pursuing. The people whose portfolios do best are those who forget about them[0] [0] http://www.businessinsider.com/forgetful-investors-performed-best-2014-9 http://www.businessinsider.com/forgetful-investors-performed...

ars 9y ago

Why do I have a feeling that some disclosure law is not going to suddenly make people not be greedy? It's one of those laws that make it look like you did something, while doing nothing. The new government is right to get rid of it - it's pointless and will help nobody. Now if you made a law that made commissions completely illegal (in finance, insurance, and other similar areas) - that would do something.

zaidf 9y ago
The point of a law is two folds: (1) to act as a deterrent (2) when violated and the violator is caught, to have an avenue to prosecute them (and provide some form of justice.) Even if you're completely right (I don't believe you are) and the law doesn't deter ANYONE from committing the crime, its second purpose still has value. Laws against homicide, robbery etc. haven't resulted in 0 homicides and robbery; and yet, they have been used to prosecute people who have committed those crimes. If those laws didn't exist, murder and robbery would not be against the law. We can argue all day if the law has done much to deter those things but it's a fact that the law helps in delivering justice. Without the law, it would be legal to murder someone and face zero legal consequences.
- ars 9y ago
  That would be true if law would actually be used to prosecute anyone. But it won't. The criteria are nebulous "must pick the best product". The advisor will just say "I believed this one was the best". How are you going to prove that? On top of that, victims don't typically even know if the advisor was wrong! So they'll never even take him to court. Plus it's a civil matter, meaning it costs the clients lots of money to bring a case. It will not have the effect you describe. Are there are requirements for review of advisors? That their advice goes to some panel for review? That the panel would have the power to actually arrest them if they disagree? It does not. It's a pointless law.
MarkMc 9y ago
How do you feel about a similar law for real estate agents? That is, the agent must act in the interest of the seller and cannot accept money from a buyer. Or a law that says lawyers must act in the interest of their clients?