Pop Quiz: How Do You Stop Sea Captains From Killing Their Passengers? : Planet Money : NPR

Our Comment by J. David Lewis:  I heard a great story on NPR’s “Planet Money” this morning (WUOT FM 91.9 in Knoxville, TN).  This one helps understand the importance of ways financial advisors are paid.  The incentives have a great deal to do with the results.  If you pay people to sell mutual funds, annuities or insurance policies, more mutual funds, annuities or policies are sold.  If you pay people to manage growth and strength of net worth, client net worth is far more likely to improve.   

 “Back in the 1700s, the British government paid sea captains to take felons to Australia. At first, it didnt work so well, Tabarrok says:

‘About a third of the males on one particularly horrific voyage died. The rest arrived beaten, starved, and sick. I mean, they were hobbling off, those who were lucky enough to survive.’

This was a scandal back in England, so the government tried to fix it with all different kinds of rules. Force the captains to bring a doctor along. Require them to bring lemons to prevent scurvy. Have inspections. Raise captains’ salaries. None of it worked.”

Listen to the solution via Pop Quiz: How Do You Stop Sea Captains From Killing Their Passengers? : Planet Money : NPR. [3 min 29 sec]

J. David Lewis founded Resource Advisory Services in 1985.  National Association of Personal Financial Advisors (NAPFA) was formed only a few years before. Lewis became a NAPFA-Registered Financial Advisor in 1986.  He is a passionate advocate for fiduciary, fee-only financial planning and has been associated with financial services since childhood in a banking family.  Contact him using david.lewis@resourceadv.com.

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