Last month, a former trader for failed financial firm Lehman Brothers explained some of the many flaws inherent in his industry, telling New York Magazine, “There’s no other industry where you could get paid so much for doing so little.” Along the same lines, in the latest issue of Bloomberg-Businesweek, former stock broker Joshua Brown (who now writes the Reformed Broker blog) says that the business of Wall Street brokers, who are supposedly meant to serve clients, is one simply aimed at generating fees for the brokers themselves. “So I think it starts with a lie,” Brown said:
The basic premise of a broker pitching a client is “I’m going to be able to consistently generate 20 percent returns a year or I’m going to consistently beat the market.” They have no way to show any track record. They are managing hundreds of different accounts, each one is different. So I think it starts with a lie.
In his new book, Brown writes, “the Street’s perpetuation of half-truths and outright myths about investment products and services has been near fatal to the average portfolio.” As Research Magazine put it, “Brown unmasks the financial industry for all to see, revealing the less-than-honest sales tactics of boiler-room brokers and dressing down investment banks for running away with fees and riches while Mom and Pop retail investors are left holding the bag.”
There are, of course, several paths taken by former Wall Street employees looking to reform the industry. In addition to Brown’s tactics, Bloomberg today profiled the former Wall Streeters working with Occupy the SEC, who are “messing with detractors’ heads [via] the emergence of a media-savvy collection of legal, banking and activist members who come off as sane and authoritative.”