I often feel very disillusioned by my industry. It doesn't have a good reputation (it hasn't earned a good reputation). And it's really sad because 90% of people desperately need help with their money. Being smart and successful absolutely does not mean that you know what to do with your own money. And why should it? You are a lawyer or an accountant or a doctor - you have your area of expertise and financial planning and investments doesn't fall in that sphere. The problem is, as Ben Carlson wrote this week, that the world, and the financial advice industry in particular, is full of charlatans.
"A charlatan has been described as someone who professes to have abilities or expertise that they do not have. The term ‘charlatan’ is perfect for the finance industry because it can attract people pretending — whether they realize it or not — to know more than they actually do." Ben Carlson.
I was putting together a seminar the other week and I wanted to highlight how dangerous the media is when it comes to your money. The media has no idea about you, your life, your goals, your dreams, your aspirations, your fears. Yet it sure can scare the living daylights out of you.
Unfortunately this headline didn't quite appear in time for my seminar:
THE BOTTOM LINE: Legendary investor Jim Rogers expects the worst crash in our lifetime
Who is going to take their hard earned cash pile, that is sitting in the bank (and subsequently eroding at 3% per year) and put it to work in the stock market after reading that?
However, Ben Carlson points out that Jim Rogers, aka "legendary investor", could well be described as a charlatan, because he has been saying exactly the same thing for YEARS. Check out these headlines:
Want to know what the US stock market (S&P500) has done since 2011, since the first headline above?
It has almost DOUBLED.
So, if in 2011 you had $500k in cash and had been following this legendary investor and kept out of the market, your $500k would now be worth around $416k (if we assume inflation ticked away at 3% over the period). If you had taken the $500k and put it all in the US stock market back in 2011, you would now have close to $1m. That's a pretty big opportunity cost.
Extreme predictions like this do absolutely nothing to help anyone. And the thing is that these guys (normally guys) only have to be right once to be called a genius. All their previous failed predictions are quickly forgotten.
My advice? Find a professional that you trust implicitly (RUN from the charlatans) and who can help you answer the questions that matter. Questions like:
- When can I stop working and how much money do I need?
- Now that I have retired how much can I safely spend from my retirement pot without running out?
- Can I give freely to my children and grandchildren?
- Am I maximising my assets?
- How can my money support my vision for my life?
- What is important about money to me?
- Have I protected the people that I love?
- How I can make the process of managing my money meaningful and fun?
- Can I reach the point where I never have to worry about money again?
- What does freedom mean to me?
Notice: nowhere in the above do I mention markets and what they will do next, or the direction of interest rates or economic growth.
Those things don't matter in your search for freedom.
If you want answers to some of the questions above, drop me a line and book a meeting, or sign up for my next event. Whether you are a smart young professional looking to make responsible decisions about your future, or a wise woman looking to find meaning and confidence in the wealth that you have, I am here to help.