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I firmly believe that the financial sector is nothing more than a thief. If you are making money, but not a product then you are stealing from someone. The high

I firmly believe that the financial sector is nothing more than a thief. If you are making money, but not a product then you are stealing from someone. The high speed traders are the best and easiest to explain example. Having said, that I send about 5-10% of my income every month to my financial advisor for him to invest because I don't know of any better option. Can anyone tell me a way to save for retirement that produces similar results and isn't funding criminals?

gaius 13y ago
Of course that is nonsense. What finance really is is the buying and selling of risk. Charging a fee to assume the risk of an asset changing in value (say, an airline pays a bank for an option on buying oil at a set price) is honest business. You make money at it by specializing in evaluating and managing risk and by being better at it than organizations for whom it is not their core competence.
- pgwhalen 13y ago
  Wow, this is really a superb way of describing finance concisely. Financiers often get tangled in certain interests in unfair or unscrupulous ways, but fundamentally it is not thievery.
- georgemcbay 13y ago
  It stops being an honest business when you can fail at it very badly, have your short-term losses covered by taxpayer bailouts and then just keep going as usual.
  - gopher1 13y ago
    Or when you can set up a financial services company whose entire mission is to trade based on insider information and market manipulation, but with a leadership structure that protects top executives from prosecution because they technically never get their hands dirty. See: http://www.pbs.org/wgbh/pages/frontline/to-catch-a-trader/ http://www.pbs.org/wgbh/pages/frontline/to-catch-a-trader/
  - randyrand 13y ago
    You're thinking about it the wrong way. The financial sector did not want to make bad investments that caused a recession. In fact, the financial sector (mainly investments) was undoubtedly, like all recessions, hurt most. Who wants to invest when companies are failing left and right? This is the reason the fed makes interest rates so low, to encourage investing since no one wants to invest. But bad investments do happen, and so did the rescission. Unfortunately the problem here was that we had put too much faith in one market, the housing market. There was not enough diversification when things started to fail. The financial sector did not steal their bailouts, we gave it to them. Just like we gave them our investment money in the first place.
    - scott_karana 13y ago
      "Bad" investments are one thing. Fraudulent ones are another. And while financial companies certainly failed and folded up, did their high-level employees care in the slightest, as they move on to the surviving companies? Did they cry themselves to sleep in their personal wealth, accrued from the falacious business deals that bankrupted their companies (little more than temporary vessels for their greed) and also bankrupted the country?
    - MaysonL 13y ago
      The financial sector did not want to make bad investments that caused a recession. They were forced to knowingly make hundreds of thousands of fraudulent loans? (Loans on which they profited mightily, personally and corporately) As far as the bailouts go, look at the players in the decisions to give them. It looks a hell of a lot like the finance industry gave itself the bailout, out of the national treasury.
      - gaius 13y ago
        They were forced to knowingly make hundreds of thousands of fraudulent loans? Yes. Why do you think everyone was so keen to sell the mortgages they had written on? Because everyone knew they were bad of course! But they were compelled to write them by the Community Reinvestment Act passed by Clinton.
- zanny 13y ago
  I don't know how well it reflects upon our society that our largest institutions exist only to mitigate taking risks.
  - gaius 13y ago
    The West is The West because we used maths to insure sea voyages rather than just praying to the Gods, which is what every other culture in the world had done up 'til then.
- aryastark 13y ago
  That's great. Until they take bad risks, cry "too big to fail" and finally socialize their risk. I'm more on the libertarian side myself, but you can't deny the hypocrisy here. If a business is so big that it poses an existential crisis to the US, then it needs to be broken up by the government. Plain and simple.
  - gaius 13y ago
    Sure but it is not as simple as that. The banks were coerced into taking on the risk by the Community Reinvestment Act.
    - dctoedt 13y ago
      No. See my response (with citation) to your other comment, up-thread.
- Double_Cast 13y ago
  I hear that becoming an actuary is nintendo-hard. So despite whether or not society overpays our financial sector, I imagine that risk management isn't as worthless a pursuit like this article suggests.
carbocation 13y ago
> If you are making money, but not a product then you are stealing from someone. That describes the entire service sector (doctors, lawyers, restaurant workers, cleaners, etc).
- dkuntz2 13y ago
  No it doesn't. In business speak a product is something you create, good or service. The difference between a good and service is that a service's product is consumed at the same time it's produced.
  - carbocation 13y ago
    Can you state that in a way that also relates back to the grandparent's point to which I was responding?
    - dkuntz2 13y ago
      How does it not relate back to the point you were responding to? You were trying to expand the GP's statement in a way that wasn't implied. The argument that parts of the financial sector doesn't really make products is somewhat valid, and can be argued either way. The argument that all service industries don't make products is wrong.
      - breischl 13y ago
        If the GP had made a more nuanced argument that sort parts of the financial sector are not really providing a valuable service, likely nobody would've disagreed. But what he actually said was: > If you are making money, but not a product then you are stealing from someone. Which is just plain wrong for at least two reasons already mentioned. Since then you've just been nitpicking at people pointing out the wrongness.
        dkuntz2 13y ago
        Except that carbocation didn't point out anything. Carbocation tried to expand the scope of the original statement, which itself is wrong.
seivan 13y ago
Your financial adviser is charging you to use index funds. Your financial adviser isn't an adviser, but a salesperson. Your financial adviser might make extra cash on the courtage you pay by getting a commission. And etc. Index Funds & Apartment is the path of least resistance. I am sure that there are honest advisers that TRY to beat index. I really do mean try here.
breischl 13y ago
It's mildly hilarious that you first claim they don't provide anything, and then complain about the services they provide. The financial sector provides the service of matching your savings up with people and companies that want to borrow them, and vice versa. Optionally, they also provide the service of advising you about who best to lend to, or doing all the work and just sending you the proceeds (ie, mutual funds, hedge funds, private equity funds). But if you really want to avoid them, then you could try... * Peer to peer lending * Hard money lending * Angel investing * Buying real estate and/or rental properties (but don't use mortgages - that's a product of the useless financial sector) Of course, those tend to require a lot more work, more capital and potentially more risk because you don't have that useless financial services industry to make it easier.
- randyrand 13y ago
  Bingo. I think the reason most people hate finance is because they don't understand it.
  - breischl 13y ago
    I think you're right in some cases. There are also certainly some legitimate and pretty big gripes to be made about the industry. But as someone in the midst of buying a house with some "interesting" zoning, I currently hate finance because I do understand it. :)
    - NkVczPkybiXICG 13y ago
      Zoning is politics, not finance.
      - breischl 13y ago
        Yes, but the zoning affects the insurability of the property and also whether it qualifies as "conforming" for the purposes of the mortgage. A non-conforming mortgage cannot be easily resold to Fannie/Freddie or securitized, so it's more difficult to get financing on a non-conforming property, which is why I've been wrangling with various lenders for a month. And the insurability questions meant that I got to spend a lot of time on the phone with insurance agents.
Spooky23 13y ago
It isn't rocket science -- Look up asset allocation models. If you don't know where to start, buy Money magazine or something similar and read it for 6 months. One strategy is to use a target-date mutual fund. Another is to pick an asset allocation model that makes sense to you and buy no-load index funds or ETFs. Paying some dude 5-10% is buying a shoulder to cry on and maybe some tax prep help.
nostrademons 13y ago
Buy index funds. You're effectively piggybacking on the "advice" of the whole financial system, and not getting charged to do it. Expense ratios are way lower, and your performance will be precisely average.
facepalm 13y ago
If you believe the financial sector is a thief, why do you pay a financial advisor?
forgottenpaswrd 13y ago
"I firmly believe that the financial sector is nothing more than a thief." Then, why do you use their services? If your financial advisor does not provide value to you you could fire him. "Can anyone tell me a way to save for retirement that produces similar results and isn't funding criminals?" Is called: Investing in yourself. You should probably do it as early as possible, you will probably lose all your money(like most people do first time they try). Then you will either go back to your financial advisor(but with some respect from what he does, as you show how it was not as easy as it looked) or you will learn and do well. Personally I don't like lots of financial institutions, mainly because the tricks of simulating value created in order to justify outrageous incomes. Then the trick is revealed and society has to pay the party. Having said that, investing well is a profession or value creation activity like any other. It takes skill to know what is going to work and what not, where to risk wealth and where not, and facing responsibility and accountabilty. The problem is not the financial services, like people like communist(much worse system) want make people to believe. The problem are monopolies, big institutions without real competition married with politicians.
- chrisBob 13y ago
  I use the service because I haven't found a better option. I feel like I am in a position of "if you can't beat 'em, join 'em" > you will probably lose all your money(like most people do first time they try) That is the problem.
kevincrane 13y ago
While I disagree with the first part of what you say, I sympathize with the second part. By paying a financial advisor, you're giving him money basically to do the work/research for you so you don't have to (that's a totally worthwhile service for a lot of people). If you don't want to do the work of researching this yourself (and I don't want to sound judgmental, it's absolutely hard and overwhelming to start with), put money in a set date retirement fund. Basically, pick the year closest to when you want to retire, dump money in the fund, and it will diversify your assets for you, becoming more conservative as you get older. https://investor.vanguard.com/mutual-funds/target-retirement/#/ https://investor.vanguard.com/mutual-funds/target-retirement...

gaius 13y ago

Of course that is nonsense. What finance really is is the buying and selling of risk. Charging a fee to assume the risk of an asset changing in value (say, an airline pays a bank for an option on buying oil at a set price) is honest business. You make money at it by specializing in evaluating and managing risk and by being better at it than organizations for whom it is not their core competence.

pgwhalen 13y ago
Wow, this is really a superb way of describing finance concisely. Financiers often get tangled in certain interests in unfair or unscrupulous ways, but fundamentally it is not thievery.
georgemcbay 13y ago
It stops being an honest business when you can fail at it very badly, have your short-term losses covered by taxpayer bailouts and then just keep going as usual.
- gopher1 13y ago
  Or when you can set up a financial services company whose entire mission is to trade based on insider information and market manipulation, but with a leadership structure that protects top executives from prosecution because they technically never get their hands dirty. See: http://www.pbs.org/wgbh/pages/frontline/to-catch-a-trader/ http://www.pbs.org/wgbh/pages/frontline/to-catch-a-trader/
- randyrand 13y ago
  You're thinking about it the wrong way. The financial sector did not want to make bad investments that caused a recession. In fact, the financial sector (mainly investments) was undoubtedly, like all recessions, hurt most. Who wants to invest when companies are failing left and right? This is the reason the fed makes interest rates so low, to encourage investing since no one wants to invest. But bad investments do happen, and so did the rescission. Unfortunately the problem here was that we had put too much faith in one market, the housing market. There was not enough diversification when things started to fail. The financial sector did not steal their bailouts, we gave it to them. Just like we gave them our investment money in the first place.
  - scott_karana 13y ago
    "Bad" investments are one thing. Fraudulent ones are another. And while financial companies certainly failed and folded up, did their high-level employees care in the slightest, as they move on to the surviving companies? Did they cry themselves to sleep in their personal wealth, accrued from the falacious business deals that bankrupted their companies (little more than temporary vessels for their greed) and also bankrupted the country?
  - MaysonL 13y ago
    The financial sector did not want to make bad investments that caused a recession. They were forced to knowingly make hundreds of thousands of fraudulent loans? (Loans on which they profited mightily, personally and corporately) As far as the bailouts go, look at the players in the decisions to give them. It looks a hell of a lot like the finance industry gave itself the bailout, out of the national treasury.
    - gaius 13y ago
      They were forced to knowingly make hundreds of thousands of fraudulent loans? Yes. Why do you think everyone was so keen to sell the mortgages they had written on? Because everyone knew they were bad of course! But they were compelled to write them by the Community Reinvestment Act passed by Clinton.
zanny 13y ago
I don't know how well it reflects upon our society that our largest institutions exist only to mitigate taking risks.
- gaius 13y ago
  The West is The West because we used maths to insure sea voyages rather than just praying to the Gods, which is what every other culture in the world had done up 'til then.
aryastark 13y ago
That's great. Until they take bad risks, cry "too big to fail" and finally socialize their risk. I'm more on the libertarian side myself, but you can't deny the hypocrisy here. If a business is so big that it poses an existential crisis to the US, then it needs to be broken up by the government. Plain and simple.
- gaius 13y ago
  Sure but it is not as simple as that. The banks were coerced into taking on the risk by the Community Reinvestment Act.
  - dctoedt 13y ago
    No. See my response (with citation) to your other comment, up-thread.
Double_Cast 13y ago
I hear that becoming an actuary is nintendo-hard. So despite whether or not society overpays our financial sector, I imagine that risk management isn't as worthless a pursuit like this article suggests.

carbocation 13y ago

> If you are making money, but not a product then you are stealing from someone. That describes the entire service sector (doctors, lawyers, restaurant workers, cleaners, etc).

dkuntz2 13y ago
No it doesn't. In business speak a product is something you create, good or service. The difference between a good and service is that a service's product is consumed at the same time it's produced.
- carbocation 13y ago
  Can you state that in a way that also relates back to the grandparent's point to which I was responding?
  - dkuntz2 13y ago
    How does it not relate back to the point you were responding to? You were trying to expand the GP's statement in a way that wasn't implied. The argument that parts of the financial sector doesn't really make products is somewhat valid, and can be argued either way. The argument that all service industries don't make products is wrong.
    - breischl 13y ago
      If the GP had made a more nuanced argument that sort parts of the financial sector are not really providing a valuable service, likely nobody would've disagreed. But what he actually said was: > If you are making money, but not a product then you are stealing from someone. Which is just plain wrong for at least two reasons already mentioned. Since then you've just been nitpicking at people pointing out the wrongness.
      - dkuntz2 13y ago
        Except that carbocation didn't point out anything. Carbocation tried to expand the scope of the original statement, which itself is wrong.

seivan 13y ago

Your financial adviser is charging you to use index funds. Your financial adviser isn't an adviser, but a salesperson. Your financial adviser might make extra cash on the courtage you pay by getting a commission. And etc. Index Funds & Apartment is the path of least resistance. I am sure that there are honest advisers that TRY to beat index. I really do mean try here.

breischl 13y ago

It's mildly hilarious that you first claim they don't provide anything, and then complain about the services they provide. The financial sector provides the service of matching your savings up with people and companies that want to borrow them, and vice versa. Optionally, they also provide the service of advising you about who best to lend to, or doing all the work and just sending you the proceeds (ie, mutual funds, hedge funds, private equity funds). But if you really want to avoid them, then you could try... * Peer to peer lending * Hard money lending * Angel investing * Buying real estate and/or rental properties (but don't use mortgages - that's a product of the useless financial sector) Of course, those tend to require a lot more work, more capital and potentially more risk because you don't have that useless financial services industry to make it easier.

randyrand 13y ago
Bingo. I think the reason most people hate finance is because they don't understand it.
- breischl 13y ago
  I think you're right in some cases. There are also certainly some legitimate and pretty big gripes to be made about the industry. But as someone in the midst of buying a house with some "interesting" zoning, I currently hate finance because I do understand it. :)
  - NkVczPkybiXICG 13y ago
    Zoning is politics, not finance.
    - breischl 13y ago
      Yes, but the zoning affects the insurability of the property and also whether it qualifies as "conforming" for the purposes of the mortgage. A non-conforming mortgage cannot be easily resold to Fannie/Freddie or securitized, so it's more difficult to get financing on a non-conforming property, which is why I've been wrangling with various lenders for a month. And the insurability questions meant that I got to spend a lot of time on the phone with insurance agents.

Spooky23 13y ago

It isn't rocket science -- Look up asset allocation models. If you don't know where to start, buy Money magazine or something similar and read it for 6 months. One strategy is to use a target-date mutual fund. Another is to pick an asset allocation model that makes sense to you and buy no-load index funds or ETFs. Paying some dude 5-10% is buying a shoulder to cry on and maybe some tax prep help.

nostrademons 13y ago

Buy index funds. You're effectively piggybacking on the "advice" of the whole financial system, and not getting charged to do it. Expense ratios are way lower, and your performance will be precisely average.

facepalm 13y ago

If you believe the financial sector is a thief, why do you pay a financial advisor?

forgottenpaswrd 13y ago

"I firmly believe that the financial sector is nothing more than a thief." Then, why do you use their services? If your financial advisor does not provide value to you you could fire him. "Can anyone tell me a way to save for retirement that produces similar results and isn't funding criminals?" Is called: Investing in yourself. You should probably do it as early as possible, you will probably lose all your money(like most people do first time they try). Then you will either go back to your financial advisor(but with some respect from what he does, as you show how it was not as easy as it looked) or you will learn and do well. Personally I don't like lots of financial institutions, mainly because the tricks of simulating value created in order to justify outrageous incomes. Then the trick is revealed and society has to pay the party. Having said that, investing well is a profession or value creation activity like any other. It takes skill to know what is going to work and what not, where to risk wealth and where not, and facing responsibility and accountabilty. The problem is not the financial services, like people like communist(much worse system) want make people to believe. The problem are monopolies, big institutions without real competition married with politicians.

chrisBob 13y ago
I use the service because I haven't found a better option. I feel like I am in a position of "if you can't beat 'em, join 'em" > you will probably lose all your money(like most people do first time they try) That is the problem.

kevincrane 13y ago

While I disagree with the first part of what you say, I sympathize with the second part. By paying a financial advisor, you're giving him money basically to do the work/research for you so you don't have to (that's a totally worthwhile service for a lot of people). If you don't want to do the work of researching this yourself (and I don't want to sound judgmental, it's absolutely hard and overwhelming to start with), put money in a set date retirement fund. Basically, pick the year closest to when you want to retire, dump money in the fund, and it will diversify your assets for you, becoming more conservative as you get older. https://investor.vanguard.com/mutual-funds/target-retirement/#/ https://investor.vanguard.com/mutual-funds/target-retirement...