Most Investors Believe Financial Services Industry Puts Profits Over Client Interests


This week’s AAII special question asked whether individual investors believe financial services firms act in their (the investor’s) best interest.

Perhaps not surprisingly, the vast majority–nearly 83%–feel that their interests are secondary to corporate profits and advisor/broker compensation. Just over 12% feel that there are some brokers and advisors that are putting investor interests first. Only 2.4% of the 410 respondents feel that, as a whole, financial services firms place investor interests primary, while the same percentage feel that, if investor interests are put first, it is only because their interests align with those of the firm, broker or advisor.

Here is a sampling of the responses:

  • “‘Best’ interest? No. They act to balance what is in the client’s interest with making as much money as they can for themselves. It is an inherent conflict of interest. Which is why I manage my own investments.”
  • “Absolutely not, barring a few exceptions. For the large majority, their objective is to maximize their own profits. They do this by promoting lots of trading activity (commissions) or via expensive asset-based compensation where they aim to maximize AUM to collect higher fees. In general, marketing trumps performance. They try to convince investors that average/mediocre is the best they can hope for while focusing their efforts on maximizing AUM. In particular, I believe compensation-based AUM is a structural problem in the industry as it creates an inherent conflict of interests between the firm and the investor. Instead, fees should be a function of true investor’s risk-adjusted returns over time, which is what investors ultimately care about. Of course, this is easier said than done.”
  • “Certainly some don’t, but I believe that most do. Those that are found to treat their clients in a way that is both unethical and/or illegal should be disciplined by their associations and/or prosecuted to the fullest extent of the law. No quarter!”
  • “I believe that there are well-meaning people in the financial services industry but seriously doubt that the compensation practices encourage behavior that acts in the interest of the customers or clients. Extremely high net-worth individuals probably get top-tier service as one would expect – they pay for it. However, the rest of customer base probably gets minimally valuable service, at best.”
  • “The ‘retail investor’ is simply cannon fodder to these financial giants. The large Wall Street institutions generate huge volumes of transactions and large fees. Most brokers are largely salesmen of the products and services offered by their company. Their first loyalty is to their company and its needs. The institution must avoid public scandals and huge losses to customers in order to keep the business going. But, they look out for themselves first.”

And here is this week’s most unique response:

  • “Well, after I read the question I started out chuckling a little, which escalated to loud giggling, and then loud guffaws. Got tears coming out of my eyes and my sides hurt now.”

Want to weigh in? Participate in our weekly member poll, updated every Tuesday, and see the results online at

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