As soon as the horse bolts it becomes necessary to bolt….so we now will talk about REGULATING the wealth management industry:

Let us see what can be done:

– all wealth management contracts should be 43 pages and have 86 signatures.

– if it includes Mutual funds, the trail commission that the wealth manager can earn over the next 22 years should be stated up front

– if life insurance is included in the portfolio the commission earned should be shown seperately

– all correspondence should be preserved for 17 years or the life of the customer or the life of the bank whichever is longer

– all wealth advisers should have a minimum qualification of PhD – could be in philosophy or finance

more regulations to follow

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  1. Subra, you are being sarcastic about the last one, right?

    I suppose the idea is we want the “Wealth Managers” (producers) to deal with “Investors” (consumers) in a “transparent” manner.

    If there were no regulators/regulations, consumers would be far more responsible and would seek “transparency” that is far more stringent than what regulators could “enforce”. “Transparency” would be a real differentiator for the “producers” than just a “regulatory requirement” as it is now. It is easier for the producers to “collude” with the “regulators” and cheat consumers en-mass.

    Ofcourse, the govt babus think they are better than everyone. They hate to see consumers “cheated”. such it goes.

  2. Maaran the whole thing is a joke not just the last one. However the private sector will self regulate is a cruel Alan Greenspan (Ayn Rand school) idea. It failed too grandly.

    Most of the people who are talking of Ayn Rand’s philosophy are IGNORING the fact that capitalism (where the owner ran the business) and pseudo capitalism (where the paid employee with a short term interest runs the company) ARE so different that many of her ideas CANNOT work.

    For example it is fairly obvious that I CANNOT BRIBE you to s*crw up YOUR OWN portfolio. However if there was a manager managing your portfolio I could attempt it (ask Hero Honda!) THAT IS A HUGE, HUGE, HUGE difference.

  3. American system of economics is not free market capitalism. Alan Greenspan I know of was a govt employee – FED chairman?. He is an epitome of what “Free market capitalism” is against. There is enough literature available on the internet for why central banks are such a bad idea & how they are to this day destroying the very concept of money by issuing fiat money.

    Financial industry is a heavily govt regulated industry that has screwed up the economic incentive structures. What free market capitalists say is free market would throw up better alternatives for these govt regulators in any industry. In the free market world Auditing & Rating companies/agencies would have real incentives to offer their service to consumers. “Insiders” or employees would have had huge incentives for “whistle blowing” or revealing any wrongdoing inside a company.

    Does govt regulate how mobile phones or computers/technology should evolve? Does the govt dictate standards in those industries? how do you think these industries relentlessly keep improving consumer experience? Every year there are better phones, faster computers, better technology? how do you think the standards in these industries evolved? Everything works so well that no one even cares to notice.

    I don’t understand the bit about employees running business?. As a shareholder/owner you are screwed if your employees don’t keep the best interests of shareholders in mind. Employees only implement strategy set by the “Board of directors” (proxy for Owners). If employees dont do their job well, they get fired (unless ofcourse there are unions, etc). Simple as that.

    If I felt my wealth manager wasn’t trying to maximise returns on my portfolio, I have the choice to move to another one. Govt can’t dictate/enforce the competence or integrity of a wealth manager.

  4. The real world evidences show this – If Govt bans any industry like betting, drugs, etc – it only attracts underworld , criminals. It does not just disappear. Similarly if govt regulates any industry heavily, it attracts crooks & cheats. Just makes it easy target for organized corruption in those industries.

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