I have shared with many of you, stories of my brief experience as a stockbroker for a major wire house back in the mid 80’s. My experience was brief because it was apparent, from day one, that the lack of ethics and the exploitation of investors were ingrained in the firm’s culture. My favorite “take away” from the many “sales meetings” was: “if you can’t sell it with a clear conscience, we will find someone who can.” (By the way, these sales meetings were always held in the basement far from the ears of customers.) There were other cultural rules to be followed but the message was always clear, I was there to make money for the firm. I was not there to provide investment advice, even if that was the advertised role of the broker. It was apparent investors needed an alternative.
Fortunately investors do have a better alternative today, the “fee-only advisor.” Being a part of the development of this new profession I came to know a great number of this new breed and many of them were “converts” from the “dark side” as I love to call it. This conversion was easy because they had a conscience and wanted to work with a “clear conscience.” As the years went by, I would hear stories about their experiences on the “dark side,” and they would always tell me that their experiences were similar to mine even if it was 10, 15, 20 years later. In other words, nothing has really changed.
Thanks to research conducted by some folks at the University of Notre Dame you don’t have to take my anecdotal evidence that the Wall Street culture has not changed. I came across this from a New York Times article yesterday summarizing the research. Over 1400 Wall Street employees participated in the confidential survey.
You can and should read the survey but here are a couple of highlights:
1. Of those earning more than $500,000 annually, 34% have witnessed, or had first hand knowledge of, wrongdoing in the workplace.
2. 51% of these folks believe their competitors are engaged in unethical or illegal activities to gain an edge in the market.
3. 32% of employees with less than 10 years experience would likely use non-public information to make a guaranteed $10 million if there was no chance of getting arrested for insider trading. So much for a new breed of stockbroker.
4. Nearly one third of respondents believe the compensation structure could incentivize employees to compromise ethics or violate the law.
There is more but you get the idea. But here’s the kicker, the reporter writing the article was trying to make the point that Wall Street has not learned its lesson, even after the last recession. I disagree; Wall Street learned its lesson decades ago. Keep politicians, who make the laws, beholden to you while they are in office, and reward them, after they leave office. Wall Street has no incentive to change the culture. There is too much money to be made. No one ever goes to jail and the billions in fines are insignificant relative to their bottom line.
Note: nytimesdealbookmay182015
Wheeler Writes 
Very sad testament on Wall Street! I too worked for a Wall Street firm many years ago and the commission trap is very tough to get out of and the firms know that. Each month you start at ZERO and have to do trades for whatever reasons. Now that I work as a “fiduciary” and on a fee basis, I know I’m doing the right thing for my clients and myself.
Great article! The industry will never change and the consumer will never learn . The consumer will spend more time on buying a new smart phone than spending time learning what it cost to have their investments mishandled by the brokerage industry.
Scary world we live in. Thanks for all your guidance. I have significantly changed how I invest based on your blog and have done well with it. Thank you!