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I wonder how much shady side-betting these financial advisors do. It's easy to make a few hundred thousand, if you get to decide where your client invests a few million.

Reminds me of the good old Goldman Sachs, who made a killing betting _against_ their clients. https://www.theguardian.com/world/2010/apr/25/goldman-sachs-...




I've never understood this perspective.

If I buy something from Goldman then they think the price is too high and I think the price is too low. If I sell something to Goldman then they think the price is too low and I think it's too high.

If they're not willing to bet against me then they'll say something like "sorry trader was off the desk". Or if they're just less willing to bet against me then they'll say "sorry mate wide atm due to volatility".


I don’t think your perspective is very useful, because you seem to be assuming that all commercial transactions are zero-sum, since you describe both parties believing they are the only ones benefitting from the transaction.

If I buy a $5 sandwich at a deli, it’s not the case that I think they’re suckers for valuing $5 more than the sandwich, and I doubt they think I’m a sucker for the inverse. Clearly, what’s really going on is that I am hungry and cannot eat a five dollar bill, whereas the deli has way more sandwich ingredients than they need to eat themselves, and they need money for other expenses. We both benefit.


I'm more relying on my experience in trading with Goldman and other banks than I am assuming anything. I also don't see where I said anything about zero sum games.


FWIW, I read your comment the same zero-sum way. Perhaps it was because you used the term "the price" as if there's one price and any deviation from that value represents error.

If I have three shoes, I might correctly place little value on the extra, while a person with only one shoe might correctly place a lot of value on it. My selling the shoe for anything more than $0 is rational, and the other person's buying the shoe for anything less than the price of a full pair of shoes is also rational.


The shoe analogy is great.

It isn't perfect because in finance everyone's goal is to make money so it's a little more complicated, but there are similarities.

You might have a situation where ex-ante both parties are making the right decision, but one party would have rather not traded ex-post.

I might have some oil exposure so I want to sell oil futures. Maybe you think oil is going up because it's above some moving average so you show me a better market than the exchange for my size. We trade. If a minute later oil is higher than I will have wish that I waited a minute to sell and you'll be glad that you bought.

I'm not saying it's zero sum because we both willingly went into the trade and it's even possible that you'll make money on a 1 minute time frame and I'll make money on a 1 year time frame or I'll receive some other benefit.

This would happen all the time in a product that I used to trade at a non-bank financial firm. I had one way of valuing it and the banks had another way. We'd trade when we disagreed.


Except in this case it was Honest Goldman's Sound Financial Advice Inc advising you to buy, and Goldman's Shady Shell Fund Ltd selling. I don't think most clients of financial advisors check who's the counterparty in their trades.

Legally, there's very little preventing your advisor from telling you to perform trades that make you poor and the advisor's buddies rich. A lot of the aftermath of the 2008 crisis boiled down to "It might not have been moral, but it sure as heck wasn't illegal".


> Legally, there's very little preventing your advisor from telling you to perform trades that make you poor and the advisor's buddies rich.

Well, other than the new Fiduciary Rule, though the Trump Administration handling of the implementation of that rule seems to have everything up in the air, from the coverage I've seen.


I don't really see the issue unless there were incentives set up to encourage this and it wasn't properly disclosed.

Usually when you trade with a bank desk you know that they're betting against you because they're the ones on the other side. If they weren't doing that then you'd always have to wait for a customer to take the opposite bet, but the market might move by the time such a customer appears.

Generally you don't want people in Honest Goldman's Sound Financial Advice Inc to know what people in Goldman's Shady Shell Fund Ltd are doing and vice-versa.


As the article tells us, a lot of athletes walk into meetings with their advisers and just get snowed by a bunch of jargon they don't really understand. They're not necessarily sophisticated investors who even know to ask these questions


I agree that there are issues with unethical financial advisors and retail customers. OP linked to an article about the wholesale "professional" market where the same rules don't and shouldn't apply. I'm saying that as someone who's been both on the bank side and the customer side.




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