Author: Michael Edesess

ISBN: 10 1-57675-407-3: 13: 978-1-57675-407-8

Economist and mathematician Michael Edesess author of The Big Investment Lie: What your financial advisor doesn't want you to know lambastes investment advisors and money managers and says that they are profiting from a big lie-promising that they can beat the market and do better than you can in investing your hard earned money. 

This is not the ranting of someone who is ignorant of what is going on in the investment world. Edesess is a highly educated and respected economist who currently chairs the board of directors at International Development Enterprises USA. Over the years he has worked as an independent consultant to institutional investors, and he was the founding partner and chief economist of the Lockwood Financial Group until it was sold for $200 million to The Bank of New York.
His areas of expertise cover the range of applications of mathematics to investments, including performance and risk measurement.
In other words, he is a serious thinker whose arguments merit attention, although they will probably result in many infuriating responses from the individuals and companies he criticizes.
 
Edesess main arguments can be summed up as follows: investment advisors and investment manages don't have a crystal ball and they cannot predict the future. Furthermore, they do not give you good value for your money as the benefits they provide are not worth their cost. On average they don't earn more money for you than you could probably earn on your own without their "expertise." And they certainly don't know how to beat the market no matter what technology and research they may have available at their finger tips. 

Most of the hype that is proliferated is based on a Big Lie that only serves to fill the pockets of these individuals with their high fees. In fact, as Edesess points out, many investors don't even realize that they are using high-cost services that typically cost 2 to 3 percent of an investor's assets annually. The arguments used by these investment managers and advisors is that people want professional advice and they feel more assured when they receive it. However, as Edesess states: "But the business would be gradually reduced to a much small, much less lucrative business if it made a practice of telling the whole truth and advising clients accordingly." Consequently, it is obliged as an entire industry to engage in the Big Lie in order to keep its business lucrative-underplaying its fees and overstating benefits in any way that are legally permissible.

Edesess harsh critique is divided into three parts where he shows how much you pay, how little you derive and the way it is sold to you.
He asks the question-why do we continually give Golden Crumbs to rich people and then goes onto explain why for the most part the advice we are paying for does not increase your wealth. Concrete examples as well as personal anecdotes are provided to support Edesess's argument that professional investment managers should not be expected to beat the market.

In his indictment of the Big Lie, Edesess may come across as a cantankerous man; however, he is right on the mark when he exposes the investment gobbledygook that is incorporated into the effective pitches to sell the Big Lie. These include, as he points out, using facile figures, technical words that most people don't understand, look respectable, earnest, and sincere, exploit the client's will to believe, move on-quickly-past objections, project the savvy look, be well prepared to co-opt counterarguments, always have a new line or product ready, "speak in tongues"- or bleed the language of its meaning, and lastly don't forget to emphasize your sophisticated technology.

Every page of The Big Investment Lie: What your financial advisor doesn't want you to know illustrates Edesess's depth of knowledge and how widely and deeply he has thought about his subject matter. He succeeds in getting you to reconsider your investment habits and behavior. He also concludes in presenting his Ten New Commandments for smart investing-something we should all pay heed to.