In light of JP Morgan’s $2 Billion blunder this is a very crucial question we all should be asking ourselves. If a bank can’t even manage its own finances, what makes you think they can manage your finances?
This isn’t the Wild West. This is an institution that takes customer deposits that are explicitly insured by U.S. taxpayers and is suppose to operate conservatively lest it suffers a major “blow up.” Continue reading
Wall Street executives come to the rescue of Goldman Sachs’ reputation. Morgan Stanley CEO James Gorman and JPMorgan Chase & Co. CEO Jamie Dimon warned their staffs not to circulate Gregg Smith’s op-ed criticizing that firm.
Gorman also said it wasn’t fair for a newspaper to publish the article. I guess it was fair for Goldman Sachs to package $1 billion of toxic mortgages and sell them to clients as a safe investment. Sachs’ clients lost $700 million.
Gorman said it was the view of a single, random employee and not a consensus opinion. Does Gorman really believe a group of current Goldman Sachs’ employees are going to risk their jobs by coming clean about the culture at that company? Give me a break. They would have to leave Sachs like Smith did before they would be willing to talk.
Even if they left they would keep quiet so another Wall Street firm would hire them. Do you believe Gorman would hire someone who told the truth about the culture at Goldman Sachs? Not very likely! Morgan Stanley has its own skeletons.
What was Goldman Sachs response to this public relations nightmare? It sent a memo to current and former employees, saying “most” of its workers believe it provides exceptional service to clients. What else would it say?
Don’t expect current employees of Goldman Sachs to go public criticizing the firm. They make too much money. Plus, they would be black listed by other Wall Street firms.
This is a great question that has no easy answer.
We know investors need the services that are provided by the financial services industry. We also know, compared to Wall Street, investors really are powerless. This does not bode well for meaningful change.
Wall Street executives are protected by influential politicians who pass regulations that protect the executives from prosecution when they defraud investors. Instead of jail time for executives, Wall Street companies are allowed to pay fines without admitting guilt.
Can investors stop these two corrupt entities from working together?
Investors are voters. They can get rid of the politicians that pass regulations that protect Wall Street executives. However, history says this is not likely to happen. Investors believe they are powerless so they accept the consequences of corrupt business practices with barely a peep.
A more practical solution is for investors to stop buying products from major Wall Street firms. They should begin using the services of small, independent Registered Investment Advisory firms that are required to put their financial interests first. These firms do a better job than their Wall Street counterparts for less money.
Investors may not be able to change Washington, but they can stop doing business with Wall Street Robber Barons that have long histories of cheating investors to maximize their own incomes.
If you won’t use the ballot box, then vote with your assets. Move them to investor friendly, independent firms.
This would be a worthy cause for Occupy Wall Street if they can get their act together.
Wall Street is counting on the short-term memories of millions of investors who need their services so it can return to business as usual.
Two times in the past decade Wall Street greed and incompetence created trillions of dollars of losses for investors. You might think investors would be fed up and pull their assets from these institutions. There are three reasons why millions of investors stay with Wall Street firms.
First, they still need Wall Street’s types of services. And, unfortunately, investors don’t know where else to go to get the planning and investment services they need.
Second, Wall Street uses advertising and other marketing tactics to tell investors what they want to hear – we are competent and trustworthy. Unfortunately, people believe these marketing messages and forget the billions of dollars of fines that Wall Street companies paid for cheating investors.
Third, Wall Street employs or licenses hundreds of thousands of personable financial advisors who commiserate with investors then sell them Wall Street’s latest products.
There is a solution. Hire an independent Registered Investment Advisor who is paid fees to help you achieve your financial goals. They do not have the conflicts of interest that afflict Wall Street companies. For example, they don’t have shareholders, Boards of Directors, and senior executives seeking $50 million bonuses. Independent professionals can focus on helping you achieve your financial goals.