This is a comment regarding this post on LinkedIn which argues the information asymmetry between bankers and clients hurts the latter and advocates information transparency to solve the problem.

But this is simply not an issue of asymmetry of information, there are several issues here.

First is the professional skills. Say a chemist is asked to solve a physics problem. He simply has no clue on how to do it. So he goes to some physics majors. Of course some of them are really good and some not so good, but he doesn’t know. He trusts that any of them are better than himself on the problem (which can be very true). So he hands the problem to a guy who is not so good and later gets back a solution, which turns out not the best solution. What would he say? He thanks him? Or he complains that his solution is not the best?

In the above case, say we give the chemist free access to all physics textbooks, i.e. making information symmetric. Though he lacks foundation, he has a strong mentality to learn, and he spent two years to know enough to be able to communicate with the physics majors. Then by interviewing, it’s still hard for him to figure out who of the physics majors can provide a best solution.

I agree that information symmetry helps in some way. But it’s not the solution. Plus, how many people have the strong mentality to really learn something? In this world, sadly, not many.

Persuading someone to learn physics is one thing, telling him to learn finance is totally different. Many people have had the experience of buying stocks. But how many really spend the efforts to learn. Very small percentage. Most simply gamble on the market. What are the results? Losses! So most drop out of the financial market after some time. And we know loss engenders fear.

So there are three types of people in the world: a) those who’ve had some success in investing; b) those who’ve had lots of losses and eventually dropped out of the market; and c) those who’ve never dared to try.

Group a) is very small compared to the other two. If they have enough information, they don’t necessarily have to go to a banker for investments, or if they go to the bankers, they might be able to find some good bankers. But the condition is if they have enough time to handle those information - they have their own job to do.

To Groups b) and c), together a predominant majority in the world, it’s not an issue of whether they have the time or ability to learn about the information, it’s that they simply don’t have the guts. They would rather entrust any professionals than make a reasonable choice, let alone do investments themselves.

Information symmetry only helps in a very small part.

So the issue of banker-client asymmetry, however unfair, is a natural situation forged by the both sides, intentionally or unintentionally. Certainly there are poor bankers and good bankers. Some may propose rosier pictures to deceive clients, but some maybe simply set themselves higher targets. Few can have guaranteed financial results. During a time period, some may over-achieve while others under-achieve. Clients can get unhappy with the under-achievers, but from the logic above, even if the clients get sufficient information, most would still be paralyzed to make good decisions.

Cheers! Santé! Prost!