Helpful Advice or Just a Sales Pitch?
Ever wonder why some financial folks seem to love one particular product or service, but hate another? Separating sales hype from helpful advice can be difficult for investors. Having worked in financial services since 1992, I’d like to share my perspective; it may help you navigate this heavily-spun industry.
Hey, Big Spender - Often, it is the financial salespeople with the strongest opinions (like out-of-town firms that buy full-page ads in multiple newspapers) who have the BIGGEST INTEREST in your money! For at least some salespeople, it would seem their opinions on what is appropriate for the investor are tied to what they can offer. What do the pitchmen really want from you? Let’s strip down three common (and often exaggerated/misleading) messages.
What They Say #1 - “The United States’ debt is $17 trillion and growing. When the Fed stops ‘printing money,’ the stock market will collapse. Inflation will soar. ‘Paper’ currencies, like the dollar, will be worthless. When China stops buying our debt, the U.S. will be in big trouble.” What the salespeople want from you: To buy gold, precious metals, diamonds, and other hard assets. [Note: when these (allegedly) more secure alternatives fall in value, the pitchmen are quick to call it a “buying opportunity,” but when the U.S. dollar increases in value, they dismiss the rise as “only temporary.” Want to add some gold to your portfolio? That‘s fine, but don’t bet your retirement on it!]
What They Say #2 - “Social Security is a Ponzi scheme; you can’t count on it. The stock market is rigged. We’re way overdue for a correction. You can’t trust your bank or Wall Street. The FDIC doesn’t have enough money to insure your bank account.” What the salespeople want from you: To buy an annuity. (I’m not opposed to annuities. They can work well for some people as part of an overall plan, but you have to get the right one for your situation.)
What They Say #3 - “I hate annuities and you should, too. Insurance agents only care about commissions. All annuities are complicated and expensive. Stocks always win in the long-term. Don’t settle for low returns; keep your money in the market for big gains.” What the salespeople want from you: To buy stocks and hire them to manage your assets. (Stocks, mutual funds, ETFs, and bonds can all be part of an overall plan. However, I rarely find it appropriate to stay heavily invested in stocks as you move into retirement.)
Get Advice - If you’d like to avoid the financial services spin, ask a few simple questions before listening to financial advice: 1. Are you a fiduciary? 2. What are your credentials? 3. Which products can – and can’t – you offer?
David D. Holland, a CERTIFIED FINANCIAL PLANNER™ practitioner, hosts a weekday radio show at 9AM on AM1380 Ormond Beach, AM1230 New Smyrna Beach and AM1490 Deland. He has also authored two books in his Confessions of a Financial Planner series. Holland offers investment advice through Holland Advisory Services, Inc., a registered investment adviser in Ormond Beach. He can be contacted at (386) 671-7526. Email your financial questions to info@DavidHolland.com.