‘Dilbert’ creator Scott Adams: ‘The financial industry is the world’s biggest scam’

For years, we have been told that one of the best investments to make in the stock market is to pick the right investment adviser, someone who provides advice about securities and is then paid by the client. But some people are simply not big advocates for the investment adviser industry, including Scott Adams, the creator of the well-known “Dilbert” cartoon strips.

Writing in a blog post entitled “How to Make More Money in Stocks,” Adams opined that the finance industry is just one giant scam and investment advisers make the job of selecting stocks too risky. This may have ticked off a few professional investment advisers who say that they’re more than just stock pickers.

dilbertAdams, who has an economics degree, presented the case that investment advisers need to somehow “justify their position” so they pretend to have a God-given stock-picking genius. He cited studies that show industry professionals usually don’t beat the market average over a period of time. They do, however, says Adams, cause a lot of taxes for clients and charge exorbitant fees.

In the meantime, the average investor acquires market index ETFs to avoid various risks averred by professional investment advisers. The problem with this, according to Adams, is that too many other people are using professional advice services and losing money. This ultimately makes the process of investing in stocks riskier than it should be.

What is Adams’s solution? Initiate a law similar to what the government has done with nutrition and cigarette labelling: legislation that makes it illegal to offer financial services without unveiling the truth “that they are mostly a waste of time.”

“I know you don’t like big government getting involved when it isn’t needed. But the financial industry as it stands now is the world’s biggest scam, and most of us agree that the government is the right agency for rooting out crime, pyramid schemes and the like. And I think most people would agree that putting warning labels on cigarettes, and nutrition information on food, has served us well. It’s time to do the same with investment advice.”

Ann Marsh of Financial-Planning.com spoke with a couple of people who took exception to Adams’s comments and said that investment advisers do more than just pick stocks but rather “talking you out of doing something stupid.”

“This is the type of thing you see toward market peaks. It’s just one more form of overconfidence,” said Josh Brown, CEO of Ritholtz Wealth Management in New York. “People forget that investment advisers in general do not spend a lot of time these days picking stocks. There’s a lot more to professional investing help than pretending you can beat the market.”

Of course, if you didn’t agree with Adams’s contentions but now you do then perhaps your “reality cheque bounced.”