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“Financial Advisors” Selling Fear Go the Next Mile


You have all heard and read the market doomsday prophets, but lately they are taking their pitch to a new level. The headlines are enough to send chills down your spine. “Market Crash Inevitable, or “Next Market Meltdown,” or even “Trump Will End the Dollar as We Know It,” ad nauseum. What do they have in common? They profess to have “The Answer,” and for an annual fee (or a huge commission,) they will share their survival secret with you. Just send money.

What else do many of these dismal prophets have in common? They can be somewhat believable, as they cite examples, even if those examples date back to the 1920’s. Their claims are based on “logic,” and are derived from vast experience and education, otherwise known as “history.” They selflessly tout past successes. An old saying goes, “Economists correctly predicted 8 of the last 3 recessions.” Funny how we never seem to hold those prognosticators to account for their various failures. (They don’t, either.)

Supporting predictions of imminent catastrophic losses has to be more difficult during periods such as this, while prosperity reigns. The usual gaggle of market naysayers is now turning to various “experts” to shore up their arguments. One recent example caught my eye for its sheer audacity by taking a pull-quote from Warren Buffet, then backing it up with a quote from a Hollywood movie producer. Really?

Most investors know of (and many are in awe of) Warren Buffett, who ranks high among the world’s most successful investors. In the article I read, the author explains that Buffett sees upcoming market losses of 50% or more. Deep into the article it is revealed that his remark was in reference to a future period the length his own past – a mere 53 years. Yet the article called this tragic upcoming(?) event “inevitable.” While not out of the question, the catastrophic claim is not supportable, even in the long run. Worse, though, is the wording, which is slanted to make it appear imminent. Adding insult to injury was the failure to reveal that Buffett used his periods of market decline to buy, rather than to sell.

Digging in deeper, the article’s author supports the doomsday claim with a quote from someone I had never heard about, so naturally I did the research. My findings were illuminating. The author supported a misused claim from Warren Buffett by quoting a Hollywood movie producer. Whoa, now I am impressed.

In my current example, the objective was to promote one of the many fully-funded life insurance products that pepper the airwaves these days. They are unsupported, vague, and overly-optimistic, but they do appeal to fear among many investors. I should also point out that claims regarding these products have been debunked by industry experts for as long as the sales pitches have been made.

Until government agencies assign the same regulatory standards to insurance and annuity averters as it does for fiduciary advisors, you will see outrageous claims made. You don’t have to believe the claims, and you should not believe the people making those claims.

Occom’s Razor states that the simplest answer is usually the correct answer. Under that premise, if something sounds too good to be true, you may want to trust your intuition.

Van Wie Financial is fee-only. For a reason.