When I'm not writing books about investing, economics and politics, I have a small business in which I offer financial advice to individuals and their families. Rather than charge $500 to $1,000 an hour for such advice, which is common on Wall Street, I decided to charge $1,000 a year. I wanted to make sure my services were affordable to middle income families as I find this work much more rewarding than advising billionaires, big corporations and governments like I used to when I worked as an investment banker at Goldman Sachs. Of course, this was back when Goldman Sachs was a reputable firm with strong business ethics and before it became the "great vampire squid wrapped around the face of humanity".
I learn a tremendous amount from speaking frequently with my investing clients. And the one thing that I am constantly amazed at is the numerous and varied ways that Wall Street has devised to rip off small investors. That and the fact that most people still trust these brokers and bankers with their money even after they have been exposed as self-interested charlatans who really don't have a clue on how to garner real returns in the market, especially after their generous fees and expenses.
This is the first in a new series on personal finance I will author entitled The Ethical Investor. Each Friday morning in the Huffington Post I will be exploring ways for you to become better investors. We begin with the first installment that is a list of the 20 ways Wall Street is ripping off small investors like yourself. In future weeks we will delve into each of these rip-offs in more detail. Then we will explore other ways to make you better investors and I hope I have the opportunity to answer some of your investing questions.
20 Ways Wall Street is Ripping Off Small Investors:
1. Providing nominal returns, not real returns.
2. Encouraging too much diversification, if that's possible.
3. Hiding fees and expenses.
4. Turning you into a passive investor.
5. Convincing you that money markets are the same as cash.
6. Telling you that bonds are safer than equities.
7. Explaining that in the long run equities outperform bonds.
8. Simply by lying about their products.
9. Convincing you that their bank is a large, stable, safe operation to deal with.
10. Recommending products that have enormous sales commissions attached to them.
11. Cheating you on bid/ask spreads.
12. Selling you what they don't want.
13. Measuring your success in dollars.
14. Lending your securities to others.
15. Ripping your eyes out if you ever try to close your account.
16. Grabbing any slight positive real return for themselves.
17. Sticking toxic waste to small investors.
18. Pretending they can pick stocks.
19. Acting like they are your best friend and they have your best interests at heart.
20. Knowing next to nothing about the value of holding real assets like gold and real estate.
John R. Talbott is a best selling author and financial consultant to families whose books predicted the housing crash and the economic crisis. You can read more about his books, the accuracy of his predictions and his financial consulting activities at www.stopthelying.com
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