Is professional financial advice harmful?
This article reviews and evaluates the current state of the U.S. Financial Advisory Profession. It cites findings from academic and governmental regulatory agency sources indicating that the profession is rife with conflicts of interest, abusive practices, and even outright fraud. This is not a matter of “a few bad apples;” rather it is a systematic condition flowing from:
- The use of asymmetric information to exploit clients,
- Principal / Agency conflicts (both disclosed and undisclosed), and
- Embedded compensation incentives designed to reward the advisor to the detriment of the client.
Schmooze, deceit, and sophisticated swindling seem to be commonly found attributes. We provide an honest discussion and offer ideas on how to select and compensate an advisor.