Will the Hippocratic Oath work for the financial industry?
Well a few decades ago your fever would have been treated in a very simple way. They would cut your vein and let you bleed a little. If that did not help, they would repeat the procedure. Repeat. Till you died. The doctor would feel sorry, but he would move on to the next patient. The next patient would die simply because the doctor did not wash his hands.
The medicine industry has come a long way from there (hopefully). Now they bleed your purse. The pharma industry has tied up with the fast food (aka poison industry) and still bleed you to death!!
Why am I talking about the Hippocratic Oath in a financial blog?
Well the financial service industry does not have a Hippocratic oath. It does not have a 5 year course with 2 years of compulsory internship with a senior doctor. So you will find people who do not know the difference between Buffett and buffet wanting to ‘help’ you with your financial planning. Of course there are planners who have read and understood Sharpe, Markowitz, Buffet, Lynch, Tobin, Faber, Edelman, Fama, Ibbotson, Miller,….well the list is too damn long.
Even worse the bleeders are still around. The industry is not organised, there are no regulators, there is no difficult qualification to get, and worse the doctor and the pharmacologist are the same person. Will it help if the advisers took an oath which says that they will put the client’s interest ahead of theirs? I seriously wonder. IN a country where people do not like paying fees if an adviser were to teach a customer how to separate the fee and the investment, the fee may just disappear. So the adviser has a vested interest not to teach. What happens to the asset management companies? are they keen that the client go direct to the fund house and invest? Again difficult to say. The AMCs are surely understaffed and have no ability to deal with zillions of walk in customers. They are not a bank which wants to and likes to deal with many customers. The fund houses and life insurance companies are assuming that their staff will deal with IFAs – so the basic questions will disappear.
The asset management companies cannot afford to recruit more people – they are actually better off paying more money to the IFA who has more assets. This makes life simpler for all of them around.
So what happens to the investor. The smarter ones will learn to do it themselves, the less inclined will learn to read the Hippocratic oath and want their advisers to read it to them loud and clear.
I want the second category to increase. The Adviser has a role in life. If you engage him, see that he is delivering the promised goods. Alas there is no tool at all to know how well the adviser is advising you, at least in the short term. IN the long term it is too late.
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