3/8/2013 6:45 PM ET|
Your adviser could be a psychopath
Research shows the financial industry attracts more than its share of charming, manipulative egotists. Here is what to watch for.
I still remember my first Ponzi scheme.
The company, First Pension Corp. of Irvine, Calif., defrauded more than 8,000 mostly elderly investors of their retirement funds in the mid-1990s. The long-running scheme enticed people to invest their individual retirement accounts into pools of mortgages -- except the loans didn't actually exist.
When I interviewed company founder William E. Cooper in prison after his sentencing, I expected him to make at least a show of remorse. Instead, all he wanted to talk about was "prosecutorial misconduct" -- the many, many ways he felt the district attorney had done him wrong.
That breathtaking encounter with the mind of a fraudster was unique only in that it was my first. I've written about several Ponzi schemes since that one, including the Bernie Madoff $50 billion debacle that dwarfed all previous scams.
Often the scam artists talk about the stress and anxiety of maintaining their frauds. Sometimes they even say they're sorry. But you have to wonder how much remorse they actually feel. How can someone steal so much from so many, yet still greet their victims day in and day out with a hearty handshake and a smile?
Such behavior carries hallmarks of the psychopath, including charm coupled with a lack of conscience. While the vast majority of financial advisers and money managers are conscientious, some researchers theorize the financial industry may have a greater-than-average number of psychopaths in its midst.
Robert D. Hare, professor emeritus at the University of British Columbia and co-author of "Snakes in Suits: When Psychopaths Go To Work," has been widely misquoted as saying that one in 10 people working on Wall Street could be a clinical psychopath.
In reality, Hare's study found that 4% of a sample of 203 corporate professionals met the definition, and Hare points out it wasn't even a representative sample that could be extrapolated to the general population of corporate executives.
The prevalence of psychopathy on Wall Street is unknown -- but Hare wouldn't be shocked if it were far above the rate in the general population, which is about 1%.
"It may be even higher than 10%, on the assumption that psychopathic entrepreneurs and risk-takers tend to gravitate toward financial watering-holes, particularly those that are enormously lucrative and poorly regulated," Hare wrote in a comment on his website. "But, until the research has been conducted, we are left with anecdotal evidence and widespread speculation."
Hare should know: He created the checklist commonly used to diagnose psychopathy including these traits:
- Lying and deceptiveness
- Shallow emotions
- Lack of empathy
- Lack of remorse
- Willingness to violate social norms
Hare points out that psychopathy is not an either/or diagnosis but a wide spectrum, with violent offenders at the extreme end.
A separate Swiss study found that some stockbrokers may be even more reckless, egoistic and destructive than psychopaths. Researchers at the University of St. Gallen found that 28 professional traders they studied were more willing to take chances and to harm their opponents than a group of psychopaths who took the same tests. Instead of aiming for the greatest gain in computer simulations, the traders tried hardest to thwart their competitors.
A group of American researchers has posited that successful investors might be considered "functional psychopaths." Fear of loss makes poor investors out of the rest of us, but those who are able to control their emotions -- or who don't feel them in the first place -- are able to make better investing decisions.
Still, you don't want to put your financial future in the hands of someone who feels no regret about lying to you, manipulating you or causing you irreparable harm. Remember, psychopaths are in it for themselves and couldn't care less about you.
More from Liz Weston:
VIDEO ON MSN MONEY
The financial adviser left Ameriprise apparently in an attempt to become a Bernie Madoff clone.
As a slight bit of satisfaction, she is now in federal prison serving a 42 month sentence and the Feds are searching for more charges.
Since this eye opening experience I have educated myself quite extensively on managing my own money. I have done quite well even surviving 2008/2009 better than most.
This should not come as a shock to anyone with even the most banal knowledge of psychology. And no, Plains most people in society are not psychopaths. Psychopathy is a unique personality trait that enables one to feel no remorse or really much emotion at all. Most people have the capacity to love and care about others even if it is only those close to them. Not so with the psychopath.
Sadly many of the traits that make a successful trader or investor are part and parcell to a psychopath. They excel at risk taking because they don't fear, and they don't really care about the consequences to others. Truth is most of what happens on Wall Street is about personal gain and the idea of societal responsibility is laughable to them and the whole system. The movie Wall Street was all about this. Gordon Gekko is the quintessential psychopathic personality this article refers to.
Take a look at what this article is saying. Let it sink in good. Now tell me, do you really think there is even a slight chance that this type of system that rewards antisocial behavior is going to serve the common citizen well? No, it will lead to our ruin, but the ruling elite won't care. They cannot care because of what they are. Thus they will merely kill us off or simply abandon us once we no longer serve their purposes. It is already happening. Do you think for a moment Wall Street traders and bankers care about the USA? They care only in so much as we have the ability to supply them with what they need. Once they find a more lucrative deal the citizens of the USA are toast. They are already offshoring our jobs overseas for cheap labor at an alarming rate. They tell us globalization is good for us as a whole and will lead to better, "knowledge" jobs down the road to replace the manual, factory jobs lost. Meanwhile they laugh at us behind our backs for being naive enough to believe such crap when the reality is staring us in the face.
They laugh because truth is they know the citizens have no power or options anyway, so who cares what we think or feel? They only let us believe we have any power.
"Take a look at what this article is saying. Let it sink in good. Now tell me, do you really think there is even a slight chance that this type of system that rewards antisocial behavior is going to serve the common citizen well? No, it will lead to our ruin, but the ruling elite won't care."
The meek will inherit the Earth. Psychopaths are not meek. Therefore, its a matter of time. Red Adair put out oil rig fires by setting off dynamite just above the well head to cut it off from oxygen. That's a great analogy for where we are headed. The fire of psychopathic money handling has burned through all it can. This past week were huge gains by a few giant i-banks. We (you and I) have always had the power to end this and we will. Rather than tell the psychopaths who what where when and how... you should probably put your thinking cap on. The solution is extremely easy. Think meek and don't make a stink when ill-gotten prosperity goes down in flames without any oxygen.
This is great.
The problem with investment gurus is they often forget that they are playing with other people's cash. Cash that often times has been saved over decades of hard work. Also, their sales pitch makes them look like they have a crystal ball that lets them see the future. Old, greedy investors go for it only to lose their shirt.
And the usual schyzo...who is just a **** convinced that he has the Midas touch
Money and Power does this to all of them....I've known a few..
The more they get, the worst it gets..
Or they get caught in some cases, or just go plain nutz....?
Always CYA, always...In all manners of Life's evils.
As curious as I am about investing, with maybe even a touch of Greed; I probably should have migrated to the field 20-25 years ago....I've always liked money and "the Art of a Deal."
Alas, I continued along a different career path that was fulfilling and interesting...
Somewhere around 30+ years ago, my interest started turning towards investments in Wall St.
Stock and equities an intriguing mixture, for the Rich to make money with..
At that time we were starting to receive profit sharing, incentive bonus or other gifts in the form of allocated shares of Company stock...Along about that time 401K savings programs were started, I thinkalso...I was hooked.
Amazing to some of us, that back then only about 30-35% of fellow workers took advantage of those plans; Probably for many various reasons, skepticism, lack of extra money in check, families to raise, other wants or needs?..I assume in some cases, a little fear of the last Depression came into play?
It was difficult to savvy, because we had (i think) up to 50% matching contributions of Company stock.(to a specific %)..Free money, WHY wouldn't anyone want that ??
Today I can name or point to those people;...That did not take advantage of a 401 early on or ever..
I also know the people that did....We live a much better care-free life.
After retiring and rolling all or most out of 401s and other bonus, plus options...To a single source brokerage house...Not the 401, because we left that with the Custordial house temporarily..
I realized what I had been learning over the last few years, gave me the advantage to possibly be a self directed Investor and an advisor to our own investments...I did exactly that..
I read and studied everything I could for about 12-18 months, different ways and ideas about managing investments on Wall St. or other venues.
About 13 years or so, ago....I rolled everything into my former Fund manager's House and took control of our investing; I still listen to advice and read or try and learn everyday...
But it did become a 2nd. career(labor of love) hobby....And I've probably saved about $40-50,000 in fees,management fees and commissions over that time..We spent those savings on ourselves.
That does not include the gains of appreciation or dividends over that period of time, which have tripled..(even with 20"08"-09) only year lost money.Yes it is worth it, but takes time and dedication.
And I'm sure there are FAs out and about, that could/should perform the same? Sometimes they may be few and far between.??
With that being said, I will say that anyone that exhibits these traits are probably someone you don't want in your life anyway. If you can use this as a rule of thumb, you can potentially limit the amount of damage these people can cause. Also, there are two parts to this equation, while I don't want to come off as blaming the victim, psychopaths tend to prey on people who are easy targets. They know how to use your own insecurities against you. Knowing yourself is one way to protect yourself and knowing their particular behaviors is the other way to protect yourself.
The other thing I want to say is that we probably live in a world largely created by psychopaths. If you look at the history of humans we are constantly plaque by wars, depravity, greed just to name a few. While their numbers are small, the amount of damage they cause is astronomical so don't take solace in the fact of only 4% existing in our population. Now with modern technology, those few people have the potential to wipe out the entire world.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.