In the following video, Michael Lewis, author of “The Big Short,” delivers his personal experience with investment management during the financial crisis. He describes the inherent conflict of interest investment banks have because of their dual roles as both client advisors and proprietary traders.
It is unfortunate for such a situation to occur; and it happens all too frequently. The 2008 – 2009 period helps to shine light this situation, but the issue persists. Lewis concludes with some of the benefits of asset allocation and indexing. The bottom line is: it is critical to the investor’s success to know who is managing her money and how that manager is compensated.