The financial service industry is loaded with regulations that are not enforceable. For example, there is no way to regulate what financial advisors say to investors. Then there are non-existent regulations that could protect investors. For example, there are no mandatory disclosure requirements for financial advisors.
Conflict of Interest
I believe it is fair to say the regulatory agencies (FINRA, SEC) have a major conflict of interest. They are supposed to protect investors from unsavory, predatory Wall Street business practices. But, too much protection has a negative impact on Wall Street revenues and profits.
For example, what if the agencies created mandatory disclosure requirements for financial advisors? Investors would have a level playing field when they selected advisors, but low quality advisors would have a tough time selling investment products. No investor wants his assets managed by someone who was selling cars three months ago. This regulation would damage Wall Street profitability so it does not exist.
Wall Street Reality
It is easy to see that regulations that benefit investors also damage Wall Street companies. How does Wall Street protect its franchise? It spends hundreds of millions of dollars per year on lobbyists who make sure regulations favor companies and not investors.
Investors do not have an equivalent organization that protects their financial interests.
It takes years of education and experience to become a real financial expert. This would cost Wall Street a lot of time and money. For example, financial advisors do not produce revenue when they are in training classes. Plus, how much specialized knowledge do you really need to sell mutual funds and other financial products? The answer is not much. They are a product, like other products, but they may impact when you retire and how you live during retirement.
There is another powerful force that impacts the way Wall Street firms interact with investors. It is the sales culture that dominates the industry. The financial advisors who produce the largest amounts of revenue often have the best sales skills. They are very skilled at convincing investors to buy what they are selling. A level playing field for investors would require a change from a sales culture to an advice culture.
You Are Responsible
Wall Street and the regulatory agencies are not going to protect you from bad financial advice, bad investment products, and inferior results. You are responsible for protecting your own financial security. However, most investors do not stand a chance. They are up against the slick sales tactics of the Wall Street Marketing Machine.
Paladin Advisor Research
Fortunately, that is about to change for investors who are willing to take an active interest in protecting their financial security. You can use the free tools on Paladin Research’s website (www.PaladinRegistry.com) to help you gather data from advisors, rate the quality of their responses, and make the right decisions.
Paladin puts the power back in the hands of investors where it belongs.