By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@paladinregistry.com
Site: http://paladinregistry.com
About: Jack writes for the InvestorWatchdog website and Worth magazine. He worked in the financial services industry from 1976 to 2004. For twenty of those years he was the president of a Registered Investment Advisory firm and a Broker/Dealer. Jack is the author of Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor and is a co-founder of PaladinRegistry.com.See Authors Posts (87) | July 18, 2009 | Wall Street Ethics

If you are relatively new to investing, you may still believe Wall Street’s TV ads and other hype that emphasize knowledge, trust, and performance. On the other hand, if you are a more experienced investor you know hype is a sales tactic that has nothing to do with you.

You also know the biggest names on Wall Street have paid billions of dollars of fines for cheating investors and company executives have been hauled off to jail or have been barred from the industry. In the past couple of years, Wall Street greed has hit a new high when its investment advice and products caused severe damage to the economy, put millions of people out of work, and caused trillions of dollars of investor losses.

Greedy executives are a big part of the Wall Street problem. They make millions while investors lose trillions. However, the Wall Street hierarchy has more levels than  executives. Most Wall Street firms are publicly traded. Consequently, they have shareholders, directors, executives, managers, and advisors. Each constituency has its own interests that are in direct conflict with the goals of investors.

Shareholders want quarterly increases in earnings to drive stock performance. Executives want rising earnings that produce seven, eight, and nine figure income and net worth from salaries, bonuses, and stock options. Executives and managers also have to meet directors’ profit expectations if they want to keep their jobs.

So what about investors? They are part of the hierarchy and they are the key to the success of the shareholders, executives, managers, and advisors. Investors own the assets that produce Wall Street’s  revenues and profits. However, their needs are in direct conflict with the needs of the Wall Street hierarchy. 

It should not be a big shock, but companies make more money when they do what is best for them versus what is best for investors. Hence the fines, industry meltdowns, bad financial advice, and low quality investment products. Make no mistake, the Wall Street hierarchy’s needs have always come first. And, this reality is the source of the  primary conflict of interest the permeates the financial services industry.