Topic: Economics
The Guilty Small Fries Had Their Part In The Meltdown Too
Financial consultants need to be held responsible for their negligence. Most failed to protect their clients assets and contributed to the downturn we're in.
by Darren Wolfe
(libertarian)
Monday, March 23, 2009

Just like many others with retirement accounts yours truly has lost a lot of money. Unlike many, though, I'm not ready to accept it as part of the risks one takes in life. Let me explain.

About a year ago I had a conversation with my financial consultant about protecting my assets because it seemed like bad times were coming. He merely repeated the mantra about not believing in timing the market and riding it out and by the time I'm ready to retire the account will be way up. Silly me listened to him and now I'm out $8,000. Thanks for nothing buddy.

This guy didn't even have the courtesy to call me about the situation. When I called him recently he acts like he's so happy to hear from me. Then the stuff got deep. No apology, he just starts talking trash about how there was no way he could have known the market would go so far down and if he could foresee such things he'd be rich, ad nauseum. Never mind that I called and asked him about that a year ago.

Later, I spoke to another financial consultant who wanted me to invest with him. He said my portfolio was too aggressive that's why I lost so much. His people only lost about 25% during this down turn, he said. He actually thought this was selling point!

Here's my point, if I could see it coming why couldn't these financial wizards? Isn't their job to see that their clients make money? True, they don' guarantee results and even issue a warning about the account possibly losing value. Fair enough, but that is only so one can't sue them. It doesn't excuse them from having a job to do, which is looking out for their clients money.

So why do these two guys still have jobs? Their bosses should have fired them for such incompetence. This should be happening industrywide. That it isn't is troubling. What's obvious is that none of them care about the little guy. Their only concern is the commissions they can make off of us and no more. The system functions as a giant vacuum cleaner to bring in people's money. If it works out great, if not then too bad.

Now that I've vented, the point about the guilty small fries part in the present meltdown is that had they acted to take people's money out of stocks and into safer investments we'd all be in a much better situation. If the trillions of dollars that have been lost had instead been saved the economy would be much better off. It is true that these financial consultants didn't cause the problem, the government did, but they sure helped make it worse.

©2009 Darren Wolfe, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Monday, March 23, 2009
Last modified: Monday, March 23, 2009

The views expressed in this article are those of Darren Wolfe only and do not represent the views of Nolan Chart, LLC or its affiliates. Darren Wolfe is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.

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Reader Comments:

Posted By: Walt Thiessen
Date: 2009-03-23 05:14:48

Their bosses should have fired them? No, you should have fired them, particularly since, as you pointed out, you could see what was coming!

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Posted By: Darren
Date: 2009-03-23 05:33:23

Walt,

A good point you bring up. The only problem is that all the finiancial consultants seem to be the same. So who do you go to that will be any different? 

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Posted By: EJ
Date: 2009-03-23 07:04:07

As someone that trades for a living, and someone that has been through a lot of financial training, the problem is two-fold: you may see it coming, you just do not know when, and the industry is in love with averages and historical analysis.  So they are taught things like the small caps will out perform the large caps that will out perform the treasuries over a certain time frame, on average. The thing is, we are individual cases, and while average is right some of the time, it is not right all of the time. 

You cannot drive your car the average speed it has been historically been driven.  Sometimes you are at 70, sometimes a crawl.  Average does not work.  If you try it, you will crash.

The same flaw that the global warming people have(every trend continues forever) also applies to many in the financial sector. 

Most people cannot quit an investment strategy even if they know it has to come to an end.  So they lose it all.  That is greed.  I have known many who wanted that last nickel on a stock price, and lost it all in the end. All for that last nickel in price rise.

You have to have the courage to go against the tide, be a contrarian, and move your assets when you recognize that something is not making sense.  Your financial consultant will not like it, but if you are not greedy, and trying to make the last nickel of profit on an investment, you will be better off.

You may not protect it all in a downturn, but you will be better off than those that follow the advice of consultants all the way down to the bottom....

EJ

 

EJ 

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Posted By: gene
Date: 2009-03-23 08:14:17

Hi Darren, good article and good point. What exactly is it they do anyway?

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Posted By: Gene,
Date: 2009-03-23 09:12:50

Thx, & good question. They're just part of the malinvestment that needs to be cleaned out by the freight train of a correction they didn't see coming.

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Posted By: Darren
Date: 2009-03-23 09:40:19

I don't know why the last comment  says it was posted by Gene. It's actually my reply.

Thx, & good question. They're just part of the malinvestment that needs to be cleaned out by the freight train of a correction they didn't see coming.

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Posted By: James Babb
Date: 2009-03-24 14:48:10

"Financial Consultant" = "Sales Rep" 

There used to be professionals who manage funds for a percentage of the growth. Do they still exist?

 

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Posted By: Darren
Date: 2009-04-18 04:12:08

Alomg the same lines as my article:

Why I Fired My Broker

http://www.theatlantic.com/doc/200905/goldberg-economy

To reply to Walt's comment, I have since fired my financial planner. My IRA is now with a brokerage that doesn't give advise. What happens to my money is all up to me.


I may not be trained in finanacial matters, but I couldn't be worse than the planner.

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