'Feeders' make money from the savings food chain

Feeders are not necessarily parasites. They provide a service that somebody wants, otherwise they would not exist. But they are still a cost in the savings chain.

Independent Financial Advisers(IFAs)

IFAs that are proper financial planners are providers, not feeders. Professional financial advice is vital. But most IFAs are disguised product sellers, and therefore feeders. Anyway, they are sufficiently important to have their own page: IFAs


.... connect you to the market. You buy, someone else sells, the broker takes a commission.

Brokers make little money if you invest - just the administration fee on your account. They only make real money if you trade.



This is the new(ish) name for large brokers who allow you to invest in a range of other assets apart from shares - most importantly funds. They charge 'platform fees' - ad valorem charges for holding your assets

Investment bankers...

.... make money out of deals: floating companies (meaning selling the original owners' shares to the wider public), arranging acquisitions and mergers, selling unwanted activities, corporate restructuring. So investment bankers are always trying to sell to business leaders the idea that they should be doing something different from what they are.

The status quo, or simply trying to run the business better, makes no money for them.

Stock analysts...

.... do the investigatory spade-work on companies. They come to a conclusion on whether the share prices of individual companies are above or below the underlying value. In other words whether they are a 'buy' or a 'sell'. What they do with this information depends on who they work for. They would be only human if they slanted their research to meet the needs of whoever is paying them.

If analysts work for brokers ('sell-side' analysts), they would want to present a clear buy/sell story that the broker's salesmen can use. Remember, a broker only makes money when you trade.

If they work for a company's 'house broker' - the broker that provides professional advice to the company - they are in the business of public relations, not analysis. If they were to make a 'sell' recommendation they'd get fired. Famously that's how Terry Smith was forced to switch his career to fund management and form Fundsmith.

If they work for Funds ('buy-side' analysts) the fund managers will use the research for their own decisions. It helps if the research is in terms that can later be used to justify those decisions to clients.

All analysts, and the other branches of the financial services conglomerates they may work for, need easy and (preferably) preferential access to the companies they are interested in. So their reviews tend to be a) rose-tinted or b) ruthlessly honest? You decide.

In the US, the use of sell-side analysts to push stocks has come to be symbolised by an analyst named Jack Grubman who famously held his 'buy' recommendations on technology stocks through the height of the tech stock boom while privately describing them in internal emails as 'POS'. This was his shorthand for 'piece of shit'.

Journalists and their employer...

.... want to sell their newspapers and magazines and make you watch their TV programmes. If that is consistent with offering good advice, fine. Unfortunately, careful inactivity - the secret of most good investing - is inimical to exciting journalism.

The Media also have space to fill, and there are plenty of people with a vested interest in the story who are willing to help them out. Misleading Media

Investor relations advisers...

.... help a company 'manage' its financial newsflow and anything else that affects its share price; also called 'financial PR'. They also, coincidentally, help the Chief Executive present himself in a good light to the people who control his future. No, not the Chairman or the Board but the senior investors in the company - the fund managers.

If you visit the head office of a major company you might expect that the brightest and best are beavering away there trying to squeeze more money for the shareholders out of widget-making or whatever. In fact you will find that the main focus of attention is the share price.

This is entirely sensible. CEOs do not get rewarded for delivering value for shareholders. They get rewarded for doing what their owners (the Funds) want. And what they want is predictability. If a company's prospects are poor the Funds can always sell that share and buy another. But if a company suffers a nasty surprise and its stock drops 20% before the insiders can get out, there is no recovery. Worse, the professionals look stupid.

That is why the most heinous crime for a CEO is to get his profit forecast wrong. He can commit horrendous strategic mistakes, but so long as he keeps ahead of the story he may survive.