The Worst Investment Advice I’ve Ever Heard Everywhere
Recently, I had the opportunity to write a guest post for the White Coat Investor website. In the post, I was critical of the personal finance industry and encouraged readers to educate themselves. There were a number of comments that agreed that I had “set up a bit of a straw man that makes advisors look particularly bad.”
I had never actually heard this “straw man” expression before and so I Googled it. Here is how Wiki defines it:
“A straw man is a common reference argument and is an informal fallacy based on false representation of an opponent’s argument. To be successful, a straw man argument requires that the audience be ignorant or uninformed of the original argument.”
Ouch. That criticism hurt. It didn’t hurt because people criticized my writing or ability to build an argument. That goes with the turf when you put your ideas and beliefs out on public display.
Here is what hurt. These commenters were basically saying that the example I gave was so extreme that no one could actually be so stupid to follow that worst case scenario advice. Anyone who would is a moron!
This “hypothetical” example was built to reflect the exact advice that we received from our advisor and followed for almost 10 years. Here is our full story if you would like the gory details.
Are we stupid?
If you believe that our argument represents a “straw man” worst possible case scenario, then we must be fools. We weren’t taken by a quick sales pitch. We bought in for a decade.
Our actions here were not smart; however, we are not stupid. We are highly educated. We each have earned 3 college degrees. We each have graduated college with honors. We each are competent enough that we’ve never spent one day of our lives unemployed, and we’ve each more than doubled our salaries since beginning our careers. We’re not complete morons!
OK, so we’re not stupid, but we must know nothing about money and finance. Well not so fast again. Despite living this worst possible case “straw man” scenario for a decade, our net worth is about 20X greater than average for our age. We must know at least a little bit about how to build wealth. We pay a bit of attention to our finances.
We’re not mentally incompetent and we’re not completely financially illiterate. So how did we manage to be in this “straw man” scenario for this long and not even know it? Plain and simple, we found our advisor by following the worst advice I’ve ever taken. If this advice is so bad, why did we not realize? Because it is advice that is repeated everywhere.
When looking to find a financial advisor, seek a referral from someone you trust.
I would challenge anyone to find an article anywhere on the internet about finding an advisor that does not contain this advice. Here is why it is so bad.
We as a nation are financially illiterate. Very few people have an understanding of the most basic personal finance information. Even people like us who do have a basic understanding of personal finance often are overwhelmed by the complexity of investing. This is why we seek the help of advisors.
Unfortunately, people don’t know what they don’t know. With good intentions, people love to try to help out. You will have many friends, colleagues, and family who are happy to refer you to “their guy”. This is how we found “our guy”. We in turn referred others to him before we finally got wise to just how bad his advice was.
Going into an advisor with our guard down led us to blindly follow his advice. We failed to ask appropriate questions. We did no due diligence. Instead we relied on trust. We signed off on things that in retrospect were obviously not in our best interests. We never ever even considered that our advisor wasn’t putting our interests first. We believed many of the half-truths that were part of his sales pitch. Even as we started to suspect that we were not receiving the best advice, we were very slow to investigate further and take control. Our trust ran that deep.
The reality is we never really wanted to become DIY investors. However, every attempt to find a better advisor lead us back to the worst advice we’ve ever heard. Unfortunately, saying or writing the same thing many times does not make it any more true.
We realized we needed to do something different. We had to educate ourselves and take control. I would recommend you do the same.
Are we unfair to the personal finance industry? Have you found a way to find a good advisor to help you to better your financial situation? Do you agree that seeking referral to an advisor is horrible advice? Share your thoughts in the comments below.
*Image courtesy of iosphere at FreeDigitalPhotos.net