(#202-1) April 23 2015. Financialization creates a system of financial dependency which results not only in massive—and destructive—income inequality, but also in systemic extortion. It lies at the heart of the current American Business Model.

DO PEOPLE REALIZE JUST HOW BADLY THEY ARE SERVED BY THE FINANCIAL INUSTRY?

IF THEY DO, THEY SEEM REMARKABLY ACCEPTING OF THE MOST EGREGIOUS PATTERNS OF SUSTAINED EXTORTION

I have frequently recommended http://www.ritholtz.com/ The following is an example of why I do. Barry Ritholtz works within the financial industry, but seems to march to the beat of a very different drum. His daily newsletter is just plain admirable. 

The Fiduciary Standard is Coming!

by Barry Ritholtz - April 20th, 2015, 12:00pm

In 2011, the Securities and Exchange Commission published a study, mandated by the Dodd-Frank Act, which concluded that all financial advisers and stock brokers should be placed under “a uniform fiduciary standard.” Basically this meant that brokers and advisers would have an obligation to put the interests of clients first and must disclose any conflicts of interest that might compromise that duty.

Wall Street was none too happy about this. The industry spent tens of millions of dollars lobbying to prevent this standard from becoming the law of the land. Indeed, of all the regulatory reforms that have come out of Dodd-Frank, nothing seems to displease the financial industry more than the proposed fiduciary rules.

Although other reforms may be inconvenient and clunky, the proposed rules probably would cut Wall Street’s fees, potentially by a lot. This is a radical change from the current rules, which allow a universe of products, costs and behaviors that history teaches us are contrary to the client’s best interest.

The jousting over standards comes amid the awful results that investors have had in their tax-deferred retirement accounts. As too many studies have confirmed (see this and this), the typical 401(k) or individual retirement account investor barely earns 2 percent a year on their savings. In the years since the Employee Retirement Income Security Act (Erisa) rules went into effect in the 1970s, the average portfolio with a 60-40 split of stocks and bonds should have returned almost four times that much.

Although poor investor decisions are part of the problem — chasing hot money managers, jumping in and out of funds, trying to time the market — high fees associated with conflicted advice have also been a persistent drag on returns.

‘High fees’—such a simple phrase, such devastating consequences.

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