My finance heroes are Burton Malkiel and John Bogle. They do raise a number of interesting points in their research and a lot are in a "Random Walk Down Wall Street." I wish I could write down all of the information which I have the back my viewpoints but it would end up taking several 100 pages so I guess I'm interested in seeing if other people at least think somewhat like me more than a debate as of now.

A) Active Equity Management doesn't really work well. The basic problem is there are way too many trying to do it and the 'professionals' charge too high of a fee.

B) The Hedge Fund industry is crazy. All of the failures of active stock management are amplified in the hedge fund industry.

C) Most M&A's fail to generate capital.

D) Most Private Equity companies simply use LBO's to buy large companies, fire people engaged in non bottom line activities like HR and research, and then load said large companies with debt. They then sell them back to the public with numbers which are inflated by the short term actions they took.

E) The best way to take a company public is through a dutch auction. Not through an I-Bank which intentionally offers the shares at a discount and charges a fee which can go as high as 6-7%.

F) I even have my reserves on how helpful the insurance industry is. I actually think most people would simply be better off saving a large chunk of their money and investing it an index fund and simply using it when they need to instead of going with insurance. Your insurance at the least should be really cheap. I don't understand expensive insurance at all...

G) The greed of the finance industry is epic. A lot of the compensation schemes they used are inherently flawed as they reward gains but don't punish losses. See PE, Hedge Funds, and other exotic financial institutions.

H) Some PE companies and venture capital at least seem to accomplish something as an aggregate, and for this I commend them.

The list goes on and on. I think the inherent problem is the incentive schemes are very perverse so the goals of the finance industry is not aligned with their customers. Additionally, they seem to outright lie a lot. I really don't know what the finance industry as a sum aggregate actually do. I think a lot of similar problems plague executives in large companies.

For the most part, I agree with all of your points. However I dont think the title of your post reflects them very well. The financial services industry accomplishes quite a bit I think. At the macro level, they do a fine job at allocating resources, increasing efficiency, and matching up lenders and borrowers. At a personal level, they also do a fine job at making individulals a good deal of money. I think its safe to saw that the financial services idustry accomplished a lot based on the fact that I cant imagine what the world would be like if it didnt exist. The entire premise that markets are efficient rests on the fact that there is a financial services industry out there and eliminating all the inefficiencies.

I totally agree though that for young people and the average person, active asset management is waste of time and money. I dont think many people outside of those who've had some financial training understand market efficiency and the concept of passive management strategies. Low cost index funds and ETFs is cearly the best way for people with a relativly small amount of investable assets to go. ETF really are interesting to me because they provide a good deal of flexibility with targeting certain sectors/industries/asset classes at an extremely low cost. A Random Walk Down Wall St really is an interesting book. I havent had a chance yet to really read through it cover to cover, but I've had a good deal of exposure to it in a few different classes Ive taken over the last 2 years. That being said, I do think their is some benefit for high net wort people to use money managers and wealth advisors. When you're looking at millions of dollars of investable assets, the complexity of a portfolio and estate planning strategies absolutly warrent some specialized advice...even for those who do have financial knowledge.

Would you say the industry has gotten to big and may take overly excessive compensation?

I agree prices are fairly efficient due to the finance industry. However the failure of the vast majority of active stock pickers to beat the index is troublesome. Additionally, pay schemes are ridiculous. John Henry's Flagship hedge fund as a net has underperformed the S&P 500, and he became a billionaire...

I think there is a perverse incentive scheme encouraging excessing activity which is hurting the US Economy.