Make Wall Street Pay You Back

You want to invest for your financial future, but after researching the latest theories, checking the mounds of fundamental data or just listening to your stockbroker espouse unintelligible jargon, your head is spinning. You are justifiably confused. Fed up. Frustrated. Angry. All you want to do is invest wisely and not become a casualty. Why is this so hard in today’s investment world? Because the rules have changed. Today’s investment landscape is drastically, radically different from yesterday’s. The individual investor is not prepared for these incredible changes. Even worse, key government agencies – the ones we rely on to protect us - are just as ill prepared as the public they are supposed to safeguard. This is why brokerage companies find it so easy to pick your pockets right under the noses of authorities who are supposed to be regulating Wall Street. Where can we turn? Not to Federal securities regulators. Not to state securities regulators. Not even to FINRA, the Financial Industry Regulatory Authority which is responsible for regulating all of the securities firms in the United States. FINRA oversees 4,000 brokerage firms, 162,000 branch offices and over 630,000 stockbrokers. How can you rely on one quasi-governmental agency to protect you from the billions of dollars spent by the brokerage community to part you from your hard earned money? Since the creation of the Securities and Exchange Commission (SEC) in 1934, has anything really changed? “The more things seem to change the more they remain the same” may sound trite, but it’s sadly true. So be on guard. The SEC, the primary Federal regulator of the U.S. securities markets, is understaffed, under budgeted and poorly lead. Why? Because the people who head the agency come from the very corporations they are supposed to regulate. Or they are merely biding time until they can go into the private sector and make millions of dollars a year protecting corporations from their former employer – the SEC. Well then, to whom do we turn? Ourselves. Investment self-defense is the only solution. It is time you learn what really happens to your investment dollars so you can tell whether your stockbroker is working for you or his own pocketbook. And if you have been the victim of stockbroker fraud or inappropriate investment advice, now is the time to find out what you can do to recover your money. Caveat Emptor – has been the prevailing view for over 500 years. Today many people still don’t know what it means or why they should care. But unless you understand that caveat emptor (buyer beware) means that you must become an informed investor before you hand over your money to a stockbroker or financial advisor, you may well become the next victim of stockbroker fraud or investment malfeasance. When I first wrote Investor Beware in 1993 the government’s direct involvement in the securities market was minimal compared with today. Now, the fundamental mechanism for price discovery in the securities markets has been all but destroyed. For centuries, investors have observed the capital markets in order to gain an understanding of price and value. It is with the vote of the stockholders and bondholders that markets “discover” the price of an item, be it a stock, bond or commodity. But since the financial crisis in 2008, the Federal government’s intervention in the bond market has hugely distorted (some say destroyed) the basic operation of the bond market. Zero percent interest rates artificially created by the Fed’s vast printing of money and purchases of government bonds have grave implications for every investor. The Fed policy of zero percent interest rates has forced stockbrokers to make inappropriate recommendations to millions of their customers throughout the United States. These fifty-three million households do not know that they are sitting on the next time bomb ready to explode. While the façade of the brokerage community may seem to be more user friendly, in reality brokerage firms exist for one and only one reason – to make billions of dollars for themselves. Don’t be fooled by slick advertising, supposedly unbiased media coverage or promises from stockbrokers or their firm’s professed experts. While you are reading this guide, the wizards of Wall Street are working on the next investment product supposedly designed to build and protect your wealth. But their concern is not about how well you do. Their concern is about how much they can make. The staggering salaries and enormous perks – $120 million a year or more for the top executives is the true indicator of where your hard earned money ends up. If you don’t want to become the next victim of “Wall Street’s Dirty Tricks” read on. Conflict of Interest Before we explore the warning signs that you may be the victim of bad investment advice (unsuitable investment recommendations), let’s first talk about the inherent conflict of interest that exists at every brokerage company. Make no mistake about it - brokerages exist to make money. Whether you profit from a stockbrokers’ advice, is of little concern to the brokerage firm. Of course they would prefer that all of their customers profit from their investment recommendations, but that is not the way the investment world works. Many recommendations simply don’t work - the client loses money, sometimes a little, but more often a lot. The brokerage companies and their stockbrokers (now called investment advisors or financial advisors) make money whether you win or lose. It is not your fault. Like any prudent person, you are seeking professional investment advice from a “reputable” brokerage company just as you would from a lawyer, accountant or doctor. The difference is that doctors, lawyers and accountants are providing unbiased advice that is in the best interest of their clients. Financial advisors provide advice that may or may not be in the best interest of their customers. In fact, the underlying cause of most investment fraud or unsuitable investment recommendations is the conflict between the brokerages’ desire to make money and the customers’ desire to obtain unbiased investment advice.