The Tragedy of It All

On our national radio and television shows, we've had so many calls and e-mails from people railing about their brokers being incompetent and ill-informed by their own firms that we just can't get to them all.

But here's the terrible truth: There are more than a few brokers and financial planners out there who know just what they're doing. Their aim is not to make money for you, but to beat all their colleagues each month and earn the highest commissions; they'll do anything to keep their commissions rolling in, especially if all they have to do is sell your life savings down the river.

They do this because their jobs and perks depend on it. Generally, it's the constant turnover of portfolio transactions that make those commissions, not the growth in value of the portfolio. And when a broker is a superstar generating millions in commissions, the firm's managers may turn a blind eye to his or her activities.

That's the first problem. The second, as we just touched on, is that Wall Street firms care about pleasing their big corporate clients. They used to claim there were Chinese walls between the investment banking side of a firm, the research analysis division, and the brokerage division, so that analysts could recommend buying or selling independent of the firm's relationship with the company in question, and brokers could recommend stocks to clients based on the analysts' research.

But as has been well documented since the dot.com crash, at many financial services firms a number of different departments were often in cahoots to please the big corporate clients. Everyone else could go to hell, as far as they were concerned.

As a result, between the spring of 2000, when the dot.com crash sent us into the second-worst bear market since World War II, and early 2002, more than 100 million individual investors in the United States lost $7 trillion in stock value, or 30% of their total investment.

Maybe you were one of those people, and maybe you were investing to send your kids to college, or to retire, or to realize a dream. In early 2001 a woman called our program to tell us that because she hadn't taken our advice in 1998 to put her 16-year-old daughter's stock gains into guaranteed investments, she had lost two years of college money. (The real reason for her call was to tell our listeners to follow the Dolans' advice!)

According to surveys by the Pew Research Center for the People & the Press, most of those investors were middle-class people between the ages of 35 and 49. Most had college degrees, many had postgraduate degrees, and most earned more than $50,000 a year, although a majority of Americans in the $30,000-to-$50,000 income range were also investing.

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