This headline could easily apply to Goldman Sachs today, as recently described by former employee Greg Smith. Actually, it is the title of a book written in 1940 by a former Wall Street employee named Fred Schwed, Jr. The title refers to a story about person admiring the yachts owned by bankers and brokers who asks where the customers' yachts were. Of course, the customers, who had dutifully followed the advice of the bankers and brokers, couldn’t afford yachts.

This just goes to show that there is nothing new about the attitude that Goldman Sachs employees were purported (probably accurately) to have about their clients. It was just as true in 1940--and likely has been forever--as it is now.

The point is that stockbrokers, investment bankers, financial planners and the like are in business to make money. And that money can only come from one place: the customers. There is nothing wrong with this.  In fact, it is the one of the basic tenets of capitalism. But it is crucial for investors to remember this and to ask “Why is this person trying to persuade me to make this investment?”

In many--hopefully most--cases, it is because the person promoting the investment really believes it is a good investment for you. But in most cases it is also because the person makes money by selling you the investment. It is up to you to understand the investment so that you can judge whether it is truly right for you.

We don’t mean to disparage all brokers, planners or bankers. There are many terrific ones out there who can help you make lots of money. Just keep in mind the old Latin motto “Caveat Emptor” (“buyer beware”). It’s okay for your broker to make money. Just make sure that you do, too.

(Anyone who thinks we are being too cynical should read Michael Lewis’ very amusing first book, Liars Poker, about his initial job as a junior investment banker. You’ll never listen to an investment pitch quite the same way again.)

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