Have you ever given advice to a member of your family, a friend or a co-worker or even a total stranger? Of course you have, everybody does it. We do it partly out of trying to be helpful but we also do it sometimes because it makes us feel important. We have an agenda.
People who write blogs or columns like this similarly have an ulterior motive. Sometimes it is to promote a product, sometimes it’s to promote themselves. I’ll own up right now and admit that my agenda is to draw attention to prospective clients about our financial planning services and the value that such planning brings to them.
Irrespective of the agenda, one of the most telling quotes that I have come across in this regard is that attributed to Steve Forbes, the publisher of Forbes Magazine who said “You make more money selling advice than following it. It’s one of the things we count on in the magazine business along with the short memory of our readers”. What Forbes was really saying is that the reader reacts to many financial advice articles in the same way that they watch the latest soap on TV, football match or latest cinema release. It is all about entertainment value. Except, that following such entertainment value can have a serious financial cost.
The problem with self promotion is that it can be misinterpreted as the right way for the reader to act. When articles, blogs, books or media appearances are too tightly focused you could be forgiven for thinking that you have missed a trick. No doubt you will have read or listened to features such as “10 ways to save money”, “5 ways to invest”, “3 things you should buy”, “Get out of stockmarkets now” and “Get into stockmarkets now”. Who is right? Who is wrong? It all depends on your personal needs and perspective.
And therein lies the issue. Generic advice is not specific to the reader even though some elements of it may resonate with any one individual. More often than not, it has no relevance. Why is that?
For one, everybody’s circumstances are different even if at first glance they appear to be similar. Age, health, goals, aspirations, personal indebtedness, potential of future gifts or inheritances, personal relationships – the list goes on. Everybody is unique, that is what makes the world the interesting place it is.
People giving advice rather than just promoting a personal agenda also give advice based on what has become personal to them. 18 months ago, I wrote a piece in the Sunday Times based on having to arrange the finances for my aunt’s stay in a long term nursing home. My experiences shaped my perspective and while it no doubt struck a chord in a number of people’s lives, judging by some emails I got afterwards, for the vast majority of readers it had no direct relevance at least not at this point in their lives.
The same thing also happens with the financial titbits that we glean from conversations with family and friends. Think back to the heyday of the Celtic Tiger and the many conversations you probably had over a cup of coffee, a night in the pub or over a dinner table while out with friends or family. Financial matters always surface at some stage and stories of foreign property purchases, buy to let in Ireland, investing in a specific stock or borrowing to invest more than likely popped up in the conversation. We’ve all been party to such discussions and many have subsequently acted on them. Why? Because we wanted something that we didn’t have. Nevertheless many didn’t stop to think if it was right for them and their own personal financial circumstances. They got caught up in the moment of greed and sought out something that allowed them to “keep up with Jones” even if they might not eventually have been able to afford it.
And this is the point. Other people’s financial affairs are personal to them. Our financial affairs are personal to us. These financial matters should be based around what is most important to us and our family’s lives. It has to be. You don’t live someone else’s life, you live your own.
By drawing up a financial plan that is personal to you, you will be able to take into account your own circumstances, goals and aspirations. The usage of specific financial products and particular financial strategies is really only the last 5% of financial planning not the first 95%. Too often we get that perspective about face and indeed many advisers do so too. In fact, some years ago I read a statistic from a survey carried out in Holland which stated that it took only 27 seconds for an adviser to first raise the issue of a specific product in a financial planning conversation. Such an approach is wrong and it is not confined to our continental cousins. I am sure that if a similar survey was carried out in Ireland it would produce a similar result. The bottom line is that the usage of financial products should only be raised at the far end of such conversations.
So the next time that you read or hear a particularly vehement piece of generic financial advice, ask yourself some questions. Does this person have a vested interest in promoting something to me? Does taking a suggested course of action confer any specific advantage to me? What are the financial downsides and what are the potential consequences for me and my family if it goes wrong? Do I really need to act on it? Have I reacted to other such advice pieces in the past and lost money?
This last question is the real question that financial readers need to ask themselves. Sometimes taking the metaphorical deep breath and doing nothing is the best thing to do.