Investors Should Look Out for Conflicts of Interest
In his new book, “Negotiating Your Investments,” Steven G. Blum discusses some of the traps investors confront when they seek financial advice. This book contains a wealth of helpful information, but I am going to focus on two areas of particular interest: conflicts of interest and asymmetric information. They are inextricably intertwined and present formidable barriers to maximizing investors’ expected returns.
Conflicts of interest. You would think investors would be sensitive to their broker or advisor having a conflict of interest. This is often not the case. Notwithstanding the wealth of information written about this subject, many investors still do not understand the critical difference between the duty to clients owed by Registered Investment Advisors and brokers.
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