I very much appreciate the comments to my Dec. 13 blog on AdvisorOne. “Mary Schapiro and the Strange Case of Business-Model Neutral”, as I do all the comments to all my blogs, and I have to admit that being compared to my hero Dennis Miller (no matter how much of a stretch) is the highlight of my career.
Veteran advisor and industry critic Errol Moody was kind enough to post an excerpt from a speech he gave back in 2006, which is just as relevant today as it was then. He included a quotation from then NASD CEO Mary Schapiro (now SEC chair), which raises another of those red herrings that the financial industry uses to deflect attention away from its anti-consumer practices. Schapiro said:
“I believe very strongly that the people best able to protect investors from mistakes, misunderstandings, deception or outright fraud are the investors themselves—if they are knowledgeable about investing and the markets. I cannot overstate the importance of this…”
With thinking like this, Ms. Schapiro and many, many others place the blame for the sorry state of personal finance in America squarely back on the investing public, as they lament a near-universal lack of “financial literacy.” Now, in the immortal words of Dennis Miller, I don’t want to get off on a rant here, but what are we talking about?
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Sure, people would be better able to make sound financial decisions if they understood the basics of risk and reward, the time value of money, the hidden costs of fees and commissions, the power of compounding, etc. etc. No question. And many advisors I know spend considerable time educating their clients.
But the notion that this rudimentary knowledge—which, like customizing my website’s “home page,” clearly falls into the category of things most people really don’t want to know—is going to somehow protect financial consumers from the conflicting interests and agendas in financial services is patently absurd. They’d have a better chance of sorting out what science really tells us about global warming, I mean, climate change.