The reason it is legal to open a palm reading shop is that the public understands it to be entertainment and not prediction. Investment advice should be the same situation: You can buy investment advice if you want it, but not until you sign a document acknowledging that science says no one has magical stock-picking skills.
I know you don’t like big government getting involved when it isn’t needed. But the financial industry as it stands now is the world’s biggest scam, and most of us agree that the government is the right agency for rooting out crime, pyramid schemes and the like. And I think most people would agree that putting warning labels on cigarettes, and nutrition information on food, has served us well. It’s time to do the same with investment advice. ~ Scott Adams
Great analysis from one of my favorite thinkers and writers.
As with many of his great ideas, this one will never happen, but you can at least take from it two questions:
- Is investment advice a scam?
- If it is, should the government do something about it?
For question #1, I’m not convinced it is. There are many people who have money and no idea how to invest. And I think that what investment advice provides could be better than what those people could get without any assistance.
I think the question is simply whether they would be better served by a government service that explains the basics in a free 4-hour class, and perhaps gives some safe suggestions.
That’s what most people need: a basic education on investing followed by some advice on how to grow your money in the safest way.
Then, the investment experts (if there are any) could provide the services that the government recommends (all backed by solid performance metrics) that aren’t diluted by the overhead of interacting (deceiving?) people through direct conversation.
That’s worth considering, but it’s still virtually impossible given the strength and resources of that industry. Meaning, they have good lobbyists.