This is a slightly tabu topic in a sense, because not a lot of people in the finance industry are willing to talk about it since their salaries have been above the average for the past few decades.
What are the main problems with the current state of the financial investment industry?
There are many different aspects we can tackle this problem from, but in this blog post we will be taking a look at the retail perspective, or your average joe 6-pack wannabe investor/trader.
Bad Advertising Practices
What do we mean by this? Well, ever since the beginning of the 2010’s we’ve seen a huge advertisement push geared towards online trading in every sense of the word. A lot of shady companies offering even shadier products (Binary Options – lol) came up out of nowhere and started to play on the human psyche. Making money is easy, trading is easy, you can buy a car within a week with only a 250 USD deposit…and things like that. Videos & images of everyday people transforming from ruggedy clothes to drinking champagne on luxury yachts were plastered all over the screens of people who would type in a few keywords in their browsers. What was the net result of all of this? Hundreds of unregulated brokers squeezing peopl’es money, making them take out loans mortgages, selling their cars and possessions just to get in on the action. But, as you can imagine, the only financial winner in this equation where the shady brokers, marketing agencies and individuals involved in creating the false hope.
95% of people lose their capital within the first (6) six months. No, you didn’t read that wrong. There have been varying numbers connected to this stat, and in 2022 brokers are required to post on their home page how many people are actually losing their money with them – but in reality, if you haven’t lost it in the first 6 months, you really haven’t made anything to write home about, that’s why the chit chat amongst industry participants (such as my self) is that the real number is somewhere around 95% because only 5% consistently make money. Why such a huge discrepancy? Investing in trading is not easy, regardless of the broker advertisements…I mean, yes it is fairly easy to set up an account. But other than that, the investing and trading it self requires years of studying preparation, hard work, consistency, mental fortitude, time effort etc.….these are all values that the 95% just don’t have available all the time. Most people are already established, with jobs, families friends commitments and the idea of dedicating the next 5-10 years to become consistently profitable is not something they look forward to.
Unregulated Brokers & Scammers
This is a huge problem within the industry. I’m sure some of you either have been, or personally know of someone that has been scammed by an unregulated broker. They usually get you to deposit a huge amount of money into a false account, which is actually an offshore bank account, they play around with your funds for a bit just so you don’t raise any suspicion. And after a while when you decide you want to withdraw some of that money, they are nowhere to be found. They don’t respond to your emails, don’t return your calls, the company address and domain are completely gone from the web, and your entire life savings has just vanished. The authorities have managed to a few things in order to decrease their numbers, but the threat is still out there, and it is something you really need to look out for.
In a future post we will dive deeper in to these subjects separately, Until then, cheers.