All too often, we hear from investors who feel disappointed, disgruntled or even downright furious about the treatment they’ve experienced at the hands of inept, inexperienced or unethical investment professionals. Unfortunately, this story is pretty common.
However, as we tell clients, you don’t have to take it anymore. Here are three alternatives to settling for sub-par financial strategies.
Choose Strategic Wealth Management Solutions Grounded in Reality
Door Number One: You can wait for Wall Street to start feeling guilty and reform itself. As you might imagine, the chances of this actually happening are not so good.
Door Number Two: You can hope or lobby for the passage of government regulations aimed at preventing consumer abuse. Sadly, regulation isn’t a practical solution for the various abuses Wall Street piles on investors. Anyway, the industry is already heavily regulated and has been since the Securities Act of 1933; it's just that the existing regulations don’t offer real protection – think Sarbanes-Oxley and Dodd-Frank -- and no serious proposals appear to be in the works.
Door Number Three: You can educate yourself as to basic investment realities, thus becoming a better-informed investor.
Of the three choices, Door Number Three makes the most sense to us. It’s feasible, attainable and doesn’t involve going back to college to earn a finance degree – and it will provide you financial peace of mind.
Will Pressure Lead Investment Firms to Change Their Ways?
As more investors choose the third solution, the chance of the first or second solutions actually happening increases. Wall Street will only change when enough consumers realize they’re being offered an inferior product at a very high price and get angry enough to apply pressure.
But until investors become better informed -- and less tolerant of ineptitude and marginal ethics --Wall Street will follow the path of least resistance. It’s up to investors to aim that path in a more beneficial direction.
Until now, Wall Street has been able to take advantage of you because it knows more than you do. However, it’s possible to tilt the playing field to your advantage.
Turning the Tables on Inept Investment Professionals
By educating yourself, you can turn the tables on Wall Street. After all, you need to know what you’re doing, because the so-called experts certainly don’t.
Consider the fact that Wall Street fleeces its investors legally, without resorting to force; rather, it all takes place within the context of voluntary exchange. But that doesn’t mean that the contest is equal. Wall Street’s got a major one-up on investors, namely familiarity with the system. Keeping investors off-balance is a full-time job, and one that Wall Street has powerful incentives to continue as long as possible.
Since Wall Street isn’t about to stop acting on its own best interest out of some sense of morals, it’s up to investors to break the pattern, opt out of the game, push themselves away from the table – and they can do it! After all, it’s investors’ money that’s being squandered, so they’ve got the most to gain from change, and thus the strongest incentive.
Don't Let Cognitive Dissonance Drive Your Wealth Planning
Finally, here’s some good news: There are superior alternatives to the defective Wall Street model. For decades, serious, highly regarded and impartial researchers have analyzed exactly how securities markets work – but to many investors, the academic model seems counter-intuitive, especially given the tendencies of the financial media to kowtow to Wall Street.
But though the Wall Street/gambling model may look more plausible on the surface, its underlying assumptions just don’t work. Until investors make an effort to peer beneath the surface, most won’t have the resolve and ability to resist the siren song of those who want you to support their gambling habit.
Of course, most investment professionals vehemently deny that they’re gambling. Some of them might even sincerely believe they can generate excess returns with their “beat the market” strategies… but they can continue believing this only by willfully remaining in obstinate denial of scientific evidence and even their own direct experience. Apparently, Wall Street is either home to the world’s slowest learners or they all have a bad case of cognitive dissonance.
Time for Change -- Choose Effective Wealth Strategies
It’s bad enough that those who are supposed to be providing you with sound, prudent investment advice are actually just gambling with your money.
That’s why we feel that "active" wealth management strategies are a form of gambling that’s even more uncertain than the variety practiced in Las Vegas and Atlantic City. At least at a casino, you can compute your odds and probabilities. You don’t have that option when it comes to the beat-the-market game. There are simply far too many variables and unknowns.