Wednesday, March 26, 2008

3 Problems with the Financial Services Industry

Here are the main problems with the financial services industry as I see it:

1. Broker/Client Interests are NEVER Aligned

You may be asking, “Well if I make more money doesn’t my broker make more money? And isn’t that good for the both of us?”

Theoretically, yes. However, as long as an adviser is paid based on the number of trades you make or the amount of money you keep in your account then he or she is NEVER motivated to do well for you.

They are not paid based on how well your stocks perform – whether or not your account goes up or down they still get paid a commission every single time you buy and sell a stock.

That’s like having a car mechanic who gets paid for the number of times he fixes your car – he’ll just make sure it stays broken for as long as possible and will continue to steal your money!

2. It’s Never About Making You Wealthy

The other thing to realize is that the people who work on Wall Street don’t want you to become insanely wealthy. If that happened then there’s a chance you’d leave them.

There’s a chance you’d stop playing the game.

So why would they try to make you wealthy? Answer: they won’t!

Instead they feed you products like Mutual Funds and Index Funds so you’ll just mimic the market and do average! Not good, not bad, just average.

3. They Always Keep Control

And one of the biggest scams that Wall Street has going for them is that they convince the investing public that investing on their own is dangerous. They convince everybody that in order to do well you need an army of analysts and bankers to tell you which stocks are good and which stocks are bad. Then, and only then, can you profit in the market!

If that were the case then why do most Mutual Funds have a tough time beating the market? And on the flipside of that argument, why does the most successful investor in the history of the world have an office of only 8 people?

Bottom line: There’s no good reason why you can’t do just as well investing on your own if you equip yourself with the right information!

Blurring The Line

As you can see there’s a serious problem in this business – there’s always a clear line in the sand: “you” and “them”. It’s never “us”.

We need to change that and we need to change it fast. We need to come up with a way where you and those you take advice from are sitting on the same side of the table.

The only way that gets done is if we change the nature of the client-advisor relationship – it can no longer be a “one way relationship”, it has to become a relationship of reciprocation, a “two way relationship”. Let me explain what I mean…

As of right now what happens when you buy a stock?

Your broker calls you (or vice versa) and rattles off a couple of stocks – you pick the one that sounds best and you buy it. That’s a one directional relationship – your advisor pushes information toward you.

Now, think about it this way – what if you could sit down at the same table as your advisor and have him teach you his process for digging through stocks?

Well, we know that would never happen due to the reasons we talked about before – if they gave away the “secret sauce” then you wouldn’t need them anymore. If they showed you how to invest, then you could go off and do it on your own.

Well, for most established companies in this industry that logic makes a lot of sense – it wouldn’t be in their best interests to make you a great investor. It would be in their interests to make you dependent upon them.

That's why I'm so excited about what we're doing at TickerHound - we have a distinct advantage here and that’s why our perspective on the situation is dramatically different from most. Our business isn’t predicated upon keeping you (and other individual investors) under our control.

We want to set the information free and allow you to live up to your fullest investing potential!

There are other companies in this space doing the same thing -,, - all great companies and all looking to do the same thing: level the playing field so the individual investors out there have a shot at taking their financial futures into their own hands and making better financial decisions today!

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