This article was a few years ago but nothing has changed today…
A new report finds 53% of financial services executives say that adhering to ethical standards inhibits career progression at their firm. A former Wall Street trader describes why
My first year on Wall Street, 1993, I was paid 14 times more than I earned the prior year and three times more than my father’s best year. For that money, I helped my company create financial products that were disguised to look simple, but which required complex math to properly understand. That first year I was roundly applauded by my bosses, who told me I was clever, and to my surprise they gave me $20,000 bonus beyond my salary.
The products were sold to many investors, many who didn’t fully understand what they were buying, most of them what we called “clueless Japanese.” The profits to my company were huge – hundreds of millions of dollars huge. The main product that made my firm great money for close to five years was was called, in typically dense finance jargon, a YIF, or a Yield Indexed Forward.
One of Wall Street’s top lawyers is taking aim at one of Washington’s biggest regulators.
In his new book, “Going Public: My Adventures Inside the SEC and How to Prevent the Next Devastating Crisis,” veteran lawyer Norm Champ recounts his tumultuous five years at the Securities and Exchange Commission.
Champ, now a partner at Kirland & Ellis, laments a “culture of fear and paranoia” spurred by anonymous complaints and backbiting. He ultimately stopped regulators from sharing information about investigations.
In the wake of the financial crisis, a slew of so-called robo-advisors promised consumers a fully automated version of money management that purports to remove human error—and avarice—from the equation. Instead of a human broker making decisions about how to invest your money, companies like Betterment and Wealthfront let algorithms do it. Experts have speculated the fiduciary rule would benefit robo-advisors by making the compliance costs too great for money managers to justify holding onto smaller clients. Robo-advisors that can perform much the same function at a lower cost would likely gobble that business right up.
In a 2015 Congressional hearing, then-Labor Secretary Tom Perez repeatedly cited Wealthfront as the way of the future. “They have a platform that enables them to lower their fees, operate as a fiduciary and do well by doing good,” Perez saidat the time.
“Today’s announcement of a rollback or freeze on some of those rules probably will shrink the market for robo-investing,” says former California state senator Sam Blakeslee, president of the broker-dealer Blakeslee & Blakeslee.
“This is a sad day for individual investors. Repeal of the fiduciary rule would imperil the retirement savings of millions of Americans,” Jon Stein, founder and CEO of Betterment, said in a statement. “Repeal means favoring the bottom lines of the financial services industry over the American people, who deserve financial transparency and honesty.”