The Biggest Conflict of Interest in Finance?

azizonomics.com / By John Aziz / August 15, 2012

Maybe this is a naive question, but as Goldman clients get skinned again and again and again andagain and again by Goldman’s failed calls — while Goldman itself continues to rack up prop trading profits — I keep wondering just why anyone would take investment advice from a trading firm?

And beyond that, why is it even legal for trading firms to advise clients? Isn’t this the biggest conflict of interest possible? We know firms including Goldman have advised clients to buy junk that the trading arm wants to get off its books.

A few months back former Goldmanite Greg Smith wrote:

What are three quick ways to become a leader at Goldman?

a) Persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit.

b) Get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them.

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2012-08-15 13:02:59

Source: http://silveristhenew.com/2012/08/15/the-biggest-conflict-of-interest-in-finance/