Home About Archives RSS Feed

The Independent Investor: Clients Last? Welcome to Wall Street

By Bill Schmick
iBerkshires Columnist
Sam Rogers, head of trading: "And you're selling something that you 'know' has no value."
John Tuld, CEO: "We are selling to willing buyers at the current market price."
John Tuld: "So that we may survive."
                                                                    — "Margin Call"

If you ever wondered where you stand on Wall Street, the op-ed piece in Wednesday's New York Times is a must read. The fallout from the words of a 12-year veteran of one of the world's most prestigious investment firm is resonating around the world.

It is not necessary for me to identify either the firm or the writer, since just about everyone now knows who I am talking about it. Yesterday, my inbox was deluged with readers who forwarded me the piece. Most readers are aware that I have a huge beef with the ethics on Wall Street and what I see as the "customer comes last" attitude that is prevalent within that sector.

As has happened in the past, I'm sure that after this column runs I will receive a flurry of hate mail from those in the financial community, who believe I am attacking them personally. I'm not. Most individuals in this business are decent folks who do care about their clients –when they are allowed.

Unfortunately, they work for firms that cannot put the interests of their clients first or even in the top ten of their business objectives. These firms are just too big, too short-term and too focused on next year's bonuses to afford the luxury of putting their clients first.

Now, I know for the most part I am preaching to the choir at this moment. As the facts have come out about just how duplicitous these companies and their managements have been in creating, exacerbating and finally being rewarded for the financial crisis they engineered. Is it any wonder that very few Americans trust Wall Street?

Despite financial legislation and promises of a new ethic by those caught with their hand in the cookie jar, it is very much business as usual on Wall Street. It cannot be otherwise. When I first got into the business in the early 1980s, the big names on the Street were largely partnerships with long-term relationships with their clients. It was a world where trust among your clients was your most valuable asset.

The shift from private to public companies, the end of fixed commissions, the dawn of proprietary trading (firms trading their own capital), the escalation of risk and with it much greater rewards, altered the ethics of finance. These new masters of the financial universe embraced greed and abandoned the old ways. As a result, they saw their total pay skyrocket 70 percent above average paychecks in all other industries in the last decade.

Big became not only beautiful but mandatory in this new high stakes area. The bigger you are, the more muscle you can throw around, not only with your competitors but with your customers as well. Clients become numbers to be crunched. Today, these firms are so big that they truly are "too big to fail." And because they are, they are largely immune from retribution or legislation.

I say we should salute this middle-management executive and his op-ed piece. He most likely will face legal and monetary retribution from his ex-firm. You see, almost everyone on Wall Street must sign both a non-compete contract as well as agree not to say anything disparaging about their firm upon departure (whether voluntary or not).

If you violate these agreements, the company will and does come after you with the full weight of their legal departments. It is one of the reasons that so few ex-employees actually "tell all" when they quit. Although this guy's opinion will amount to no more than a cry in the darkness, he should be commended and remembered for his courage and honesty.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.



1 Comments
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Pittsfield's Capitol Marquee Bids Come In High, Council Still Supportive
Westfield State Women's Lacrosse Downs MCLA
Williams Women's Lax Finishes with Loss to Middlebury
Take Steps to Control Your Investment Taxes
North Adams Happenings: April 25-April 1
Pittsfield Approves $74 Million Wastewater Upgrades
Bernard Suggests North Adams May Hold Spectrum Meeting
Williamstown Select Board Salutes Volunteers, Recommends Sand Springs Article
Taconic High Principal Tapped for Adams-Cheshire Superintendent Post
VFW Post 448 Donates 10K To 'Operation Copsicle'

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (255)
Independent Investor (348)
Archives:
April 2018 (5)
April 2017 (2)
March 2018 (6)
February 2018 (7)
January 2018 (7)
December 2017 (8)
November 2017 (5)
October 2017 (5)
September 2017 (5)
July 2017 (2)
June 2017 (8)
May 2017 (7)
Tags:
Euro Interest Rates Taxes Stimulus Commodities Currency Rally Housing Stocks Congress Economy Election Oil Debt Ceiling Federal Reserve Stock Market Recession Pullback Bailout Europe Deficit Debt Selloff Greece Crisis Fiscal Cliff Energy Japan Banks Markets Retirement Wall Street Metals Europe Jobs
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: Markets Are Going Higher
The Independent Investor: Does Cash Mean Currencies?
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
@theMarket: Earnings Up; Stocks, Not So Much
The Independent Investor: Why the Tax Cuts Are Unpopular Among Americans
The Independent Investor: The Facebook Fallacy
@theMarket: The Trump Trade Bluff
The Independent Investor: Free Trade Vs. Fair Trade
@theMarket: Will April Be Better for the Markets?
The Independent Investor: Financial Planners Held to Higher Standard
@theMarket: Trump's Trade Wars Sink Markets
The Independent Investor: Medicare Premiums and Your Income
@themarket: Trump's Tariff Talk Trashes Global Markets