I know this blog is supposed to chronicle my journey to independence, but there has been a question rolling around in my gray matter for some time now. The question is this, "What is a financial advisor?" To attempt to answer this, let's go back 20-30 years.
Remember when your stockbroker invested your money, your CPA did your taxes, your attorney drafted your wills, your insurance agent "sold" you life insurance, and banks held your checking and savings accounts and loaned you money? When financial planners began to gain recognition–and client loyalty–the aforementioned professions began to expand their services, almost saying, "Hey, we can do that, too!" I know financial planners weren't the only catalyst.
Glass-Steagall Act ?EUR" A Brief History
After much speculation during the 1920′s and the ultimate collapse of the U.S. stock market, all confidence in the monetary system was lost. After much public pressure, Congress acted and created legislation to restore the public's confidence. Among the legislation was the Glass-Steagall Act in 1933. The Act brought much needed supervision to the banking industry, which had engaged in speculative lending practices, and separated deposit banks from the more risky securities dealers and investment bankers. The FDIC was also set up in 1933 to protect depositors and help restore confidence. The Securities Exchange Act of 1934 was then established to provide oversight of the securities industry. So for many years, banking operations were segregated from the investment world until Glass-Steagall was repealed. This repeal occurred in 1999 under President Clinton and removed the barriers that banks had faced for decades. Today, banks are free to engage in a variety of activities, including some of the speculative activities of the banks during the roaring 20′s. So far we've seen some of the fruit of this repeal in the debacle of Enron Corp.
