Sometimes getting no advice is better than getting any advice. Now ask the thousands of people who lost their money in the various financial products and I’m sure that they can’t agree more. Take a look at the current economic malaise and it will make you wonder as to how so many smart, rational individuals and institutions can get themselves in this rut; and I can’t help thinking that sooner or later, I will have to join the ranks of these unfortunate people. Surely, we all hope that the Economic Bail-Out Package from the US Government comes sooner than later!
Let’s put this into perspective, the fortunate ones aren’t any wiser than the unfortunate ones. The fact remains that no one is exempt from the perils of the vicious economic cycles. It is a fact of life - people lose money in a downturn. But, for most of us, who have lost any money, it is hard earned and we had no intention of losing it on risky financial products. Yet, thousands of retails investors were made to believe that they were dealing with low risk financial products (like Lehman Brother’s Mini Bonds) when they were really derivative financial products that are supposed to be classified as high risk.
One might say that the problem is with the classification of risk or the naming of the financial products. While, others might argue that there have been serious lapses in our compliance framework. One thing for sure, these rationalizations do not offer any reprieve to those who have lost their life savings.
Imagine this; you paid your Relationship Manager in the bank (“RM”) fees for giving you lousy financial advice. The irony of it is that they didn’t know that they giving you bad financial advice and they were just doing their job. They acted in good faith. They are honest god fearing individuals and honestly I don’t think there was any trickery involved. They were just part of an out-dated financial system.
Now that we have ascertained that your RM knows as much or as little as we do about Financial Markets, the question that we need to ask ourselves is whether we are going to continue buying lunch for them. Fortunately, for the RMs, some of us can still afford to buy free lunch for them. But, if you belong to the rest of us who can’t afford to buy them free lunch or simply had enough of them. Then there are two things that we can hope for:
One: a tighter compliance framework for the banking and financial services industry.
Two: that RMs be paid based on performance of clients’ portfolio so that they take some accountability for their advice.
But, we can’t simply stick around and hope for things to happen! Certainly, we can do better for ourselves by taking charge of our own investments by getting ourselves acquainted with the tools that are out there to manage our investment portfolios, educating ourselves about investment and sticking to a simple policy of making consistent returns on our portfolios.
Listen to our podcasts at http://www.protegesoft.com/casestudies/
Or read our case study at http://www.protegesoft.com/casestudies/ on how we have achieved consistent returns on financial portfolios for retail investors.
As I sit down and reflect on the current situation, I realize that the one thing that we lack is an index to measure the greed in us and as long as there is greed, there will be market vagaries and upturns and downturns and market opportunities.
As they say, there is an opportunity under every crisis, but how many of us are really in a position to participate in this? There must surely be a way for the smaller investors to participate when the wealth changes hands next!
No comments:
Post a Comment