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Trashy Temptation: Grab That Low-Hanging Fruit

| March 20, 2015
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It pains me to write this entry.  You never want to bite the hand that feeds you, but in this case, I must. As a father of four, I’ve seen the movie The Sound of Music more than a few times.  You know that song that goes ‘these are a few of my favorite things’?  The wholesome list of favorite things in the song includes things like raindrops on roses and whiskers on kittens, etc. I’ll spare you the rest.  Anyway, if I were to re-write the song to reflect my own tastes it would have to include some of the classic, all too cliché items like football and 5 minutes of peace and quiet (again, I have 4 kids).  But it would also include the not so obvious items, one of which would be low-hanging fruit.  I didn’t get to where I am today without grabbing some low hanging fruit along the way. If you’ve ever heard any of my jokes or stories you know what I’m talking about!  It is one thing to reach for this fruit in your jokes, but it tends to serve as a poor strategy in the world of business, particularly in my line of business.  Low-hanging fruit in my business can mean shortcuts and following the path of least resistance which can lead to mistakes and misunderstandings.  I couldn’t help but think of this low-hanging fruit concept as I read a recent article that appeared on Yahoo! Finance.  The article is entitled ‘Five ways your financial advisor can screw up your retirement, legally’.  The ‘five ways’ discussed are as low-hanging as they come.  For your reference, the link to the article is:

In my opinion, this article is the equivalent of a journalistic peep show with no other purpose than to stir quick, empty, and unproductive interest.  The article tweaked me on two levels.  The first was with the article specifically, and the second was on a larger scale relating to the financial press in general.  For those taking the time to read this entry, please reference the link/article itself for specifics.  I’ll comment on each of these two levels below:

Level 1/The Article Itself: 

The author of this article runs through 5 ways that things can be ‘screwed up’ by your financial advisor.  The five ways spans from fees (opacity and level of) to active vs. passive management.  I’m going to opt-out of nit-picking through each of the five points, except one, his point about employer sponsored retirement plans being rolled to IRA plans.  The article’s author says that for many investors in a workplace retirement plan, their best option (once they’ve left their job) is to leave their balance in the plan.  While the author’s point about many work retirement plans having solid and cost effective options available is a valid one, it misses the point, by a mile.  While investment costs are indeed an important factor, there are other pieces to the puzzle that are equally, if not more important than cost. Workers want and need help with their plan balances.  By ‘help’, I don’t mean the good looking, sharply dressed guy/gal that comes in from the company that is the custodian for the retirement plan to host the annual ‘lunch and learn’ in the cafeteria to dole out generic/pre-fabricated/CYA advice like:

·       Diversification is important

·       investing is about risk and return

·       You should regularly contribute to your plan

·       You should consider lowering your level of risk as you get closer to retirement.

Plan participants want legitimate, personalized guidance with their plans and in my experience, they are willing to pay - as in, additional cost - for it.  This article ignores the fact that while a work retirement plan may have quality, inexpensive options, those options are limited.  Few workplace retirement plans give participants both the depth and breadth of investment options that an IRA can.  Ignoring this fact is an enormous oversight.

As for the rest of the article, have you ever heard the old analogy about kicking someone off the boat and then throwing them a life preserver?  It’s the old ‘shove and throw’ strategy.  This strategy can and does effectively apply to many professions. For instance, your physician may walk you through your blood work results and tell you about all of the elevated risks that you currently face (thus, shoving you off the boat).  Presumably, your doctor would then throw you a proverbial life preserver and tell you how your new regiment of diet, exercise, and medications will help to lower these concerning health risks.  A financial advisor may walk you through your retirement plan and show you the unsatisfactory results of continuing to do what you’ve been doing (shove).  This advisor would then show you what re-arranging your portfolio, saving more money, etc. can do to help your retirement goal (preserver).  This ‘shove and throw’ formula is actually quite useful in helping people do what they need to do for themselves.

So what happens when you shove someone off the boat and don’t throw them the preserver?  It doesn’t end well of course.  That’s what the author of this article is doing and I find it to be sloppy and irresponsible.  Why do I care?  Many of my clients read this kind of garbage.  In this article I saw 5 cherry-picked, overly-generalized, emotion-rousing issues, and not one single solution or suggestion on how they could’ve have been avoided or fixed.   That’s not helpful and it’s a waste of the reader’s time.

I can’t help but wonder if this blog entry would then be a waste of the reader’s time………is it a waste of time to read a blog entry about an article that the blogger found to be a waste of time?  ‘Waste’ is such an ugly word, let’s move on……

Level 2: The Financial Media in General:

I see way too many of these types of articles out there and unfortunately, they aren’t going away.  Why not?  Because people love them.  They’re a quick, easy read, and they’re interesting in the sense that they get you fired up.  At the end of the day, the financial press/media is in the business of selling advertising space on the web and in print and the more eyeballs that view a page, the higher the ad revenues are.  I get it.  The most unfortunate part of all of this is that most of these articles are being presented under the guise of some sort of public service.  That, of course, is a Trojan horse because this type of material is undoubtedly a disservice to the investing public and is generated with profit, not public service in mind.

Did your mom or teacher ever tell you that if you didn’t have anything nice to say, then you shouldn’t say anything at all?  Well, here’s a message to the financial media:  if you don’t have anything constructive to write, don’t write anything at all.  Tell that to a reporter who has a deadline tomorrow morning at 8 AM!  If the financial press really wanted to serve individual investors, I would think that focusing on how to find a competent advisor (see my previous blog post: Financial Advisor Selection – The No B.S. Guide) would be a great place to start.   Of course, that isn’t nearly as interesting or headline grabbing as examples of fumbling and bumbling advisors who are ‘screwing up your retirement’.  That’s a shame.

That’s all for now.  I’m sure you’ve enjoyed reading this blog entry and feel both educated and entertained, but the time has come to shut it down (shove).  But don’t worry, I’ll be back in the next week or two with another enlightening and informative post (throw).  Textbook.

By: Andrew Gonski

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the techniques and strategies discussed will yield positive outcomes.





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