There’s a powerful piece in today’s NY Times in case you haven’t seen it yet. This part hit me like a ton of bricks:
“What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.”
The article really resonates with me because of my own personal experience on Wall Street and at big firms. I remember hanging up the phone 10 years ago after a very large trade with a great friend/client of mine and immediately checking the P&L (profit and loss) to see my commission and then thinking to myself:
“He could have done that trade for $7 at ETrade….”
I was always battling with the need to generate revenue for the firm (and keep my job) while also trying to do what I thought was best for the client. I had a conflict of interest in my mind at all times. I kept wanting to reduce the fees for my clients through ETF’s or other products while also trying to create a more performance based business. One in which the performance of my recommendations was actually in-line with what the client’s goals were.
So what did I do? I left the firm, started a small private investment partnership, made a bunch of money for rich guys for 7 years and then realized during the financial crisis that what I was doing for society was not much better than what I was always doing….In a weird sort of way the website (being free and all) became my release. A way for me to give back to the public without charging them an arm and a leg.
I’m a firm believer in the importance of Wall Street. But I also worry about the negative effects of financialization and the vast impact this is having on society. Unfortunately, the world is just starting to catch on to this effect and it’s way too late….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.