Wall Street for Dummies Feb 7, 2025
?
TV ads reveal a lot about consumer preferences. Back in the day there were ads touting the alleged prowess of the Wall Street legacy firms. The most egregious one promoted the now defunct, EF Hutton. Their ads featured well-dressed business types proudly proclaiming “My broker is EF Hutton.” Then a booming voice announced, “When EF Hutton talks, everybody listens.”
I saw an ad on TV the other day that signals that the financial services industry is headed in a new direction. It starts out with Carl, the iconic, loud mouth, know it all broker. He is in a cab with a couple of twenty somethings. The cab gets stuck in rush hour traffic and a female shouts, “There’s a Schwab office.” She jumps out of the cab and proclaims, “This is where I can manage my own investments and make my own trades.” Carl slams the dash and bemoans “Not Schwab again??”
My spouse will tell you; I have no social life. Whenever I come into contact with a fellow human being, a discussion of the stock market breaks out. I usually walk away flummoxed by how little investors know about the current state of the financial services industry.
The Schwab ad is significant because discount brokers are announcing to the world that there is a new sheriff in town. The discount firms are brokerage firms that allow their clients to make their own trades and manage their own money without the involvement of a license broker. They are small in numbers, but big in size. ?
The clients of the Wall Street legacy firms pay substantial fees in order to receive their brokers council and advice. The clients of the discount brokers make their own trades and manage their accounts without professional advice and their associated fees.
This begs the question, is the juice worth the squeeze? The discount brokers have 120 million clients and control $30 trillion in assets. The legacy Wall Street brokerage firms manage $10 trillion for 20 million clients.
Obviously, some do and some don’t feel that the juice is worth the squeeze. But investing is not a one size fits all proposition. If you are fully aware of how much you are paying to have someone squeeze your oranges, and are content with the juice, I wish you God speed.
I have just launched my podcast “Wall Street for Dummies.” Can be found on Spotify.
?
?