Dilbert Creator: The Financial Industry Is The World's Biggest Scam
In a new post titled "How to make more money in stocks" Adams, who also holds a degree in economics, argues that the financial industry is the world's biggest scam and that investment advisors make stocks risky.
From Adams:
An investment advisor needs to justify his pay, and that means pretending to have stock-picking magical powers that science has never discovered. Every study on the topic shows that the professionals generally don't beat the market average over time. But they do cause a lot of churn that causes a lot of unnecessary taxpaying on gains. And the professionals charge enough to take perhaps 25% of your potential annual gain in fees.
Meanwhile, wise people such as you buy your market index ETFs and avoid all of the risks injected by the professional investment advisors. But your potential stock gains are suppressed because so many other people are using professional advice and losing money. That makes the category of "investing in stocks" look riskier than it is.
So my suggestion for permanently lifting the value of the stock market to new sustainably high price-earnings ratios is to pass a law making it illegal to offer financial services without disclosing the truth - that they are mostly a waste of your time.
…I know you don't like big government getting involved when it isn't needed. But the financial industry as it stands now is the world's biggest scam, and most of us agree that the government is the right agency for rooting out crime, pyramid schemes and the like. And I think most people would agree that putting warning labels on cigarettes, and nutrition information on food, has served us well. It's time to do the same with investment advice.
Adams suggests that the government do for investment advice what it did for nutrition: set up a pyramid "that shows most people should own broad market ETFs under a certain set of simple conditions."
Ann Marsh's piece in Financial Planning, which first pointed us to Adams' post, has planners pointing out that advisors do more than just pick stocks. They keep investors from acting impulsively.
Josh Brown, CEO of Ritholtz Wealth Management in New York, tells Marsh this "this is the type of thing you see toward market peaks. ...It's just one more form of overconfidence."