The Big Investment Lie: What Your Financial Advisor Doesn't Want You to Know

Michael Edesess

01/2007 · Berrett-Koehler Publishers

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An insider’s account of how consumers are scammed by the investment advice industry, and how to avoid throwing your money away.
 
The investment advice and management industry is built on fraud: the idea that professional advisors can predictably and consistently help you get a better rate of return on your investments. The industry sells us on this lie using manipulative tactics that are studied, refined, Wall Street-minted, Madison Avenue-packaged—and extraordinarily effective. 
 
Here, Michael Edesess exposes the shocking truth that, in fact, behind the success of nearly every prosperous investment professional lies not the ability to procure higher rates of return on investment for his or her clients but the ability to procure astoundingly high fees from those clients and nothing more. Through fascinating and sometimes humorous anecdotes and straightforward explanations of investment theory and scientific evidence, Edesess reveals just how badly investors are being scammed by The Big Investment Lie. 
 
He examines how the master salespeople that make up the industry sell their cleverly concocted distortions of truth—to the tune of $200 billion a year—to unsuspecting consumers who swallow them hook, line, and sinker. He then shines a spotlight on the true cost of the industry’s useless advice, showing that a prudent independent investor, following a conservative strategy, can reap anywhere from forty percent to over one hundred percent more than an investor who falls for The Big Investment Lie. Detailing the Ten New Commandments for Smart Investing—practical advice for how, where, and when to invest your money to maximize wealth—The Big Investment Lie provides the guidance you need to secure your financial future without throwing your hard-earned money away on the fraudulent investment advice industry.

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MICHAEL EDESESS is an accomplished mathematician and economist with experience in the investment, energy, environment, and sustainable development fields. He was a founding partner in 1994 and chief economist of the Lockwood Financial Group until its sale to the Bank of New York in September 2002. Previously an independent consultant to institutional investors, his clients included several of the largest investment banking and consulting firms. His areas of expertise cover the range of applications of mathematics to investments, including performance and risk measurement; Monte Carlo methods for asset-liability, asset allocation, and pension planning models; dynamic hedging using futures and options; effective style mix determination; backtesting; and quadratic portfolio mean-variance optimization. Dr. Edesess has spoken at conferences on investment research and taught courses in international finance, economics, mathematics, statistics, systems analysis, and environmental policy at four universities. He has been published in the Wall Street Journal and the Journal of Portfolio Management and has been interviewed on CNBC.