“Today’s investors don’t know how good they have it.”-so an Author has told us.
Choices, fees, diversification, information and advice make today so much superior than 50 years ago. So we are led to believe. As one who has seen the development of the financial industry, up close and personal, over the past 50 years, I find those statements bogus and, quite frankly, B.S.
Let’s see why.
The author contrasts 1966 with today. Now granted I started in the industry in 1973, seven years later, however my grandfather was a broker on Wall Street from 1924 on. Perhaps the family and I have a bit of insight? Let’s follow the author’s line reasoning and see if we can reach the same conclusion or not.
Trading and information- In 1966 information took time to be disseminated. There was no internet, no email, no twitter. Therefore decisions and responses took time to develop and required much more thought and analysis. Today most investors respond instantaneously from emotion. Just hit the button and you are in or you are out. Giving time for the well thought out decision to develop is a thing of the past.
In 1966 a trade required an intermediary. Today everyone is a trader, an expert, not in need of a real third party buffer. As they say “today it’s so simple even a cave man can do it.” Why should we bounce our thoughts off of anyone when we can rely on the latest social media blast or the screaming head on TV.
Diversification- In the old days it was stocks, bonds or cash. You were either long, short or neutral. Perhaps even a smattering of all three. The author says that today our choices are endless. Unfortunately most of those choices have been created for the sole purpose of benefitting Wall Street. New twists on old products (1929 trusts) have given us the opportunity to span the gamut from simplistic index funds to highly leveraged derivatives. All have been designed to take thought out of the financial trading equation. No fuss, no bother just hit the button for the yellow brick road to Wall Street riches.
Investment Advice- Supposedly it wasn’t sophisticated back then. Descriptions of asset classes were non –existent, information was limited and God forbid that your advisor got paid. Most mutual funds charged an upfront load of 8%, deducted right off the top. Shocking, appalling the author suggests. Today we can buy for as little as .5% ( not including internal spreads etc.). Those days it was understood that the Mutual Fund, like a job, was to be held for years and years. The service by the broker was also expected to be given for the same length of time without any further compensation. The lucky chap got a piece of that one time 8%. Can you imagine going to your doctor, lawyer or shrink and saying “you must continue to service me but since you have been paid once don’t expect any further remuneration.” His response more than likely would be “don’t let the door hit you on the way out.”
The author also hints at the fiduciary responsibility required by most advisors. Commission, fees and costs, in most instances are set by the industry or regulatory bodies. The overwhelming majority of brokers and advisors, both past and present, have always tried to do the best for their clients. So why is the focus on “Fiduciary Responsibility”? Because it is code for do it the cheapest, don’t take a position or express an opinion and if you are lucky I won’t sue you if things don’t turn exactly as thought.
The author contends that 2016 offers more opportunity for “investor” success than 1966. Unfortunately his argument should be immediately questioned since he uses the word “investor.” Today that animal does not exist. The casino has usurped the simplicity of stocks, bonds and cash and all the thoughtful analysis that that dictates. The 2016 financial world has become a very dangerous high tech game suited only for the HOUSE.
Whether it is 1966 or 2016 one thing is certain, the HOUSE always wins.
So how good do today’s investors really have it? You decide!