Undercover Study Finds That Financial Advisers Put Profits Ahead Of Their Clients

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http://thinkprogress.org/economy/2012/04/02/456840/undercover-study-financial-advisers/

Former Goldman Sachs trader Greg Smith publicly resigned three weeks ago, decrying the firm’s “toxic and destructive” culture in a scathing New York Times editorial. But it isn’t just traders at America’s biggest investment bank that view their clients as “muppets,” at least according to a new study from the National Bureau of Economic Research.

In 2008, the authors conducted an undercover study in which trained actors made more than 300 visits to financial advisers available to the general public through banks, brokerages, and investment advisory firms. The results: “Financial advisers not only fail to curb investors’ worst habits, they actually tend to reinforce them — especially when those habits generate fees for the advisers,” as SmartMoney reports:
http://www.smartmoney.com/invest/stocks/financial-advisers-flunk-undercover-sting-1333374512622/

So, when the actors came into these offices, what happened? Basically, the advisers advised the dummy clients to do a whole lot of things that were in the advisers’ interests, while making some adjustments based on just how much they thought the clients could be persuaded to do.

Most strikingly, the advisers nudged people in low-cost index funds toward high-fee actively managed funds — blatantly making their clients worse off.



http://www.advisorone.com/2012/04/02/most-advisors-caught-failing-clients-in-research-s

[Gibby]

1. Shocked, I tell you, I am shocked

[PoliticAverse]

3. Also shocked, shocked!...

[seeviewonder]

2. I held many securities and insurance licenses as

recently as last year. All of them has since lapsed and I do not intend to ever get them again. I admit that I got into the business to help people with their money (and I helped many, whether they realize it or not). So many of my coworkers, however, were in it for the wrong reasons. I couldn't handle being around them any longer so I left and let my licenses lapse. There are many laws, both state and federal, against practices mentioned above but they do nothing to deter outright fraudulent trading and advice.