I would suggest to any client who will receive an advice similar as the one above from any stock-broker to switch to another one.

To leverage the equity of a home and short-sell regardless...that must be among the dumbest things anyone can advice clients to do. That is just ridiculous advice.

I would not recommend to listen to stock brokers for investment advice in the first place. They may push products which are in the interest of the company they represent and not what is best for their clients.

If investors insist on taking investment advice from stock brokers I suggest that they understand the investment strategy implied by the company and make sure that it will be the same as their own.

The suggestion that double digit returns are achieved only due to a lack of regulation and transparency is also a ridiculous one, in my opinion.

I do think investors should be informed where their money is invested and that is all the transparency required. A statement every month which shows where the investors money has been invested over that period is all the transpareny needed in my opinion. Specifc for hedge-funds, the light regulation in place at the moment are sufficent as well.

Hedge-funds should be given the option but not the obligation to register with any oversight comittee and the sound hedge-funds will do so as they have nothing to hide but any regulation or disclosure rules which will force hedge-funds to lay out their strategies needs to be avoided at all times.

The insuance industry is full of individuals which are pushed by commissions and they want to sell products, i.e. insurance policies and to paint a picture that an insurance agent is always concerned about the well being of a client is nonsense.

In every industry you will have good and bad companies and therefore good and bad individuals which represent that company.

__________________
It is not smart to play it safe but it is safe to play it smart.

Hermes,

It is true, and I'll agree, that "In every industry you will have good and bad companies and therefore good and bad individuals which represent that company."

It is up to every individual to protect their own interests by doing due diligence, making sure any recommendation is trustworthy. Don't blindly trust someone simply because they come from a well-known firm (because size does not equal quality) or have slick materials. The fact remains that NO ONE should make decisions FOR you, but should instead assist you in making better decisions through education, understanding, and experience. Trust should be earned, not given.

But I will disagree wholeheartedly with your statement: "The insurance industry is full of individuals which are pushed by commissions and they want to sell products, i.e. insurance policies and to paint a picture that an insurance agent is always concerned about the well being of a client is nonsense."

Just because someone gets paid by commissions does NOT mean they are "motivated" by them (or money at all, for that matter). Some, not all, of the products I provide to my clients involve commissions, and has NOTHING to do with what motivates me to come to the office every day. When I go to bed every night, I look into the mirror and ask myself an important question: "Did I do everything I could possibly do to enrich the lives of everyone I came into contact with today? And what could I do better tomorrow?"

I have, on average, 5 meetings with a client before *any* product or solution is even mentioned. Some strategies involve products that are ONLY AVAILABLE by commission (life insurance being one of them). Others involve non-commissionable products and services. But, instead of accepting commissions would it be better if I just charged a "fee"? Why don't I charge $1000 for a "financial plan", as financial planners do, instead of providing it for free? Why don't I charge $10000 for an "estate plan", as many attorneys do, when my firm already provides it for free? Because there are many ways to run a business, and for me, commissions allow me to provide many lifetime services to my clients entirely free of charge. Most of the time, too, these commissions don't even come out of the client's pocket!

I believe the insurance and financial services industries are not loaded with "bad individuals", as you say, but rather that they are filled with individuals that are somewhat incompetent, under-trained, and under-developed, and if they happen to be motivated by money its simply by the fact that the large companies recruit this way. In fact, it may be the ONLY way to recruit new blood into the industry, because otherwise it is a career that can be very tough, stressful, and filled with compliance, regulation, tedious paperwork, rejection, and is completely misunderstood. How many kids do you know who have ever said, "When I grow up... I want to be a life insurance agent."?

I would say that the brokerage industry, of which I am a part of and have been a member for many years, is more full of deceit and scandalous behavior than your average life insurance agent. But I know many brokers that have taken very good care of their clients over the years, and do right by them. You will find bad apples in any industry. So blanketing an entire industry just because of the way they get paid is ludicrous. As is attaching any sort of "common belief" that brokers and insurance agents are only motivated by commissions and therefore are money-hungry mongers out to sell you something you don't need/want.

It is all about finding people that will earn, and maintain, your trust. That will be there through thick and thin, in the best and worst of times. And will leverage their experience, knowledge, and wisdom to help you navigate through a world that is filled with complexity and confusion, and is all the meanwhile dynamic and ever-changing.

Relationships will determine success or failure for anyone involved in the insurance or financial services industries. Product is worthless if it is not part of a bigger strategy, and strategy can only be developed interactively within a trusting relationship.

I neither said that it is bad to get paid commissions nor that every individual which gets paid commissions is motivated by them. There are plenty of individuals who are motivated by them but I didn't say that every single person in the industry is motivated by commissions. Having said that, we all know that not every insurance agent is concerned about what is in the best interest of their clients.

One thing that I completely agree with you on is that relationships with your clients are a vital key to determine success and failure and that they are very important.

Just to make one thing clear:

I never said that all insurance agents and all brokers are money-hungry employees which are only motivated by commissions. I did say that there are good and bad companies/individuals in each industry and in the end it is up to the individual to determine what is required/wanted and how to define good and bad.

__________________
It is not smart to play it safe but it is safe to play it smart.