The absurdity of a bizarre mindset that expects investors to become capital markets experts…

I just wanted to expand upon some bizarre comments made in a Financial Post article, a “Victim of bad advice struggles to pay off investment disaster”. 


She lived modestly and sought financial advice in order to build a solid life at the end of her career. But she made a major investment mistake when she retired. An advisor told her to go into debt to obtain money for mutual fund investments.

The problems that Tess faces are by no means unique. She has accepted advice in the past without testing it by getting second opinions or studying capital markets and recommended investments. If she begins to do those things now, her financial future is likely to be brighter, Mr. Moran says. “If she studies the financial costs of investments, looks at the downside as well as the potential gains, she is less likely to tumble into another trap of debt.”

Personally I think it is unrealistic to expect investors to become capital markets experts and to understand the ins and outs of recommended investments in the necessary detail and at the appropriate level to be able to satisfy the comments made in the above paragraph. 

The generics of the recommended strategy and investments should be communicated by the advisor at outset, and preferably in writing, and this advice should be in the client’s best interests. 

This recommendation is unworkable and is unfortunately representative of a bizarre mindset that sees investors as responsible for the often complex and sophisticated processes that govern suitability and that allows advisors to represent best interests yet get away with acts that I can only categorise as criminal.

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