By Robert Frank
After the mauling they experienced in the past few years, the rich might be forgiven for losing trust in their bankers and wealth advisers. But apparently, there is one group they trust even less: the press.
- Associated Press
- Who do the wealthy trust: the bankers in front of the mikes, or the reporters behind them?
A survey from SEI, which polled investors with $5 million or more in investible assets, asked respondents where they they get the most trusted investing information. The overwhelming majority (87%) said they consider industry professionals (bankers, wealth advisers) to be the most trusted source of investing information. Only 17% said the press was the most trusted source. None of the respondents chose the third category, which was peers.
We should take these results with a boulder-size grain of salt, of course. The company that conducted the poll, SEI, is a wealth-management and asset-management firm that is in the business of trying to win more rich clients. Its obviously in their interest to say that the wealthy trust companies like theirs.
Still, I am surprised that after so many Wall Street conflicts have been exposed–Goldman Sachs Group’s Abacus deal, the Merrill Lynch prop-trading settlement, the State Street settlement–wealthy investors still trust information from their bankers more than the press.
Of course, as a member of the press, I am not exactly objective either. And the press can always be faulted for not uncovering some of these conflicts earlier or giving them enough attention.
Who do you trust more for investment information? Bankers? The press? Your peers?
I don’t put a lot of trust in bankers or the press. There’s too little in the way of fiduciary duty to blindly trust financial professionals with whom you don’t have a track record. Screwed up incentive structures lead to less than ideal advice. Plus, many press releases just parrot what the investment industry tells them. How much stock can you put in any station that considers reading Tweets solid reporting?
Most of the time the people who report the news don’t really understand the news they are reporting when it comes to finance. It was none more evident than when the financial system collapsed. The likes of CNBC and even the WSJ seemed to use “whisper down the lane” to build the basis for fact. It wasn’t until at least six months after the crisis occurred that the media took the time to really understand the mechanics. Given the complication of causes, it is not expected they would’ve understood it right away. But no one bothered to say that they didn’t understand it…they went on the air and to the press with information in an authoritative tone that was undeserving. Among the best unconflicted financial advisors, you can depend on conduct thorough due diligence before providing advice.
Both parties of thieves deserve each other. A perfect match made in hell!
Let’s not overstate the case against journalists now. Some case studies that come to mind; the Enron debacle, in that case a lone female reporter at Fortune was brave enough to stick her neck out. These are not exceptions why journalists at car magazines were joking about the dot com bubble long before it broke. The Economist has a long record of doing some probing work. They warned about the housing crisis long before many, even Goldman was the subject of a quite revealing article at a time when it was blasphemy to question the house of Saks. They were not drinking the Jim Jonesian brew. It’s true that the typical article will be laced with inaccuracies. But we would be shooting for the stars if we expected the gospel truth from an article. Due diligence is needed for all investments. Journalism is just the general information on which further detailed research will have to be done. A lawyer goes to his sources,case law and statute when doing his work. The same should apply to the investor whether professional or amateur.
I trust our judgment and the advice from the investment group that I belong to. I read a lot of information, and feel about 50% of it is BS. The only problem is discovering which 50%. I feel we get good information from our accountant and from the lawyer we have on retainer.
One of the guys in my group would call this a “moonlight and candlelight” survey. The questions are worded such that you know the results before the survey is taken and know you will get lucky. :-)