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Comment by slg | Hacker News Reader

Devil's advocate, why should the financial service industry be different than any other sales industry? Remember most financial service people are simply salespeople pushing a product.

No one would bat an eye if a used car salesman put his own personal interest above the interest of his customer? Why should we then be outraged when someone sells you an annuity that isn't the ideal product for you? If it is my responsibility to educate myself enough that I don't spend an extra grand when the dealer recommends they undercoat my new car, why shouldn't I have to educate myself on why I shoudn't purchase an annuity in my new IRA?

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> why shouldn't I have to educate myself

The problem with this argument is that it devolves into:

1. Requring that everyone knows everything about everything (total knowledge)

2. It being acceptable to take advantage of anyone who doesn't do #1

I see this argument as a trust issue. I'd prefer to live in a society free from kickbacks and money passed under the table, and arguing for it is the first step to even worse corruption.

Personally, I'd love for it to be self regulating - for example, the "You break the candy bar in half, I get to pick which piece I get, and you get the other" model, where the best action for the breaker is to make a perfect 50/50 cut. I'd love for honesty to be the best policy for all involved parties.

> No one would bat an eye if a used car salesman put his own personal interest above the interest of his customer?

That could be because they expect used car salesmen to behave unethically. In that case, their "not batting an eye" would indicate that they don't feel a responsibility to address this injustice, not that the act under consideration is perfectly just by their standards.

> Why should we then be outraged when someone sells you an annuity that isn't the ideal product for you?

Because it strikes us as violating our ethical principles. From my perspective, business should be about providing value for the customer. Taking advantage of people to get their money is terrible, and I would think less of anyone (car salesman or financial planner) who did so.

A good salesman persuades customers to take action that is beneficial to both parties.

> That could be because they expect used car salesmen to behave unethically.

Do you really expect bankers to act ethically?

Two reasons. The first is that these people often don't look like salesmen. They come in appearing to be providing impartial advice, and all the incentives, commissions, etc... that bias their advice are kept secret. The other problem is that these guys are often pushing complex products to an uneducated public where small details can make a big difference. A small change in an annual fee for an investment can, thanks to the magic of compound interest, easily add up to huge differences in investment returns.

Let's extend that even more, why should doctors have to put their patients' interests above their own? It should be your responsibility to educate yourself as to what procedures are good for you and what is necessary for your conditions.

If the above comment makes anything clear, it's just how urgently we need a universal sarcasm symbol.

We have laws protecting you when you buy a car too, for example if it's stolen or has outstanding debt against it then that's the dealers problem. There's obviously a bit of a trade off as to how you write consumer protection legislation but it sounds like the laws referred to in the NYT article should be tightened. I don't know how far they could take it though - if the advisor is obliged to do what is best for the customer then he'd probably have to put the money in an index fund and fire himself.

The car salesman pushes you to buy the best quality car, and this is generally understood.

The financial "adviser" (what a misleading name!) pushes you to buy the worst quality product, and this is not generally understood. They encourage this confusion by present themselves as being more like lawyers or accountants than salesmen.

> The car salesman pushes you to buy the best quality car

Nope. The car salesman pushes you to buy the car with the highest profit margin that fits (or is slightly above) your budget.

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