Investment Industry Advertising - The Devil Is In the Details
There is no shortage of ads focused on investing that investors are exposed to, and many come with catchy headlines.
The problem when confronted with realms of information is that we focus on the headlines and ignore the details. They say knowledge is power. We believe the more we know, the more likely we are to make better decisions and better decisions lead to better outcomes.
Unfortunately, you need to get into the details to decide if the headlines are accurate and more important, do they apply in your situation. General information does not always work in your specific situation.
For example, what is it with these adds claiming that you can retire 30% richer?
There is no doubt these kinds of ads get peoples’ attention but looking at what assumptions are used to come to these conclusions is critical.
After a closer look at the formula applied, you can see what they are comparing. They assume everyone will buy “average mutual funds” that achieve the exact same “average return” before fees are applied. Is that realistic? Ask yourself if you believe that is the case. If you do not, then the rest of the formula is inaccurate. It can only apply if you bought into that formula.
Simply put, they are suggesting that the returns are identical because we are all average and we all buy “average mutual funds”. So, the only way to generate the best result is ignore the investment and focus on the fees. Who decided you should even be buying mutual funds? Are they the best investment choice available to you? Maybe the reason they are being referenced is that they come with higher fees, so it is easy to make a point. Fees are important, but they are not the only thing that determines your results. We have been doing this for 25 years and we have never had a prospective client call and ask us if we could help them to achieve average results with average risk. The people that call us are looking for above average results with below average risk (you should note that the formula did not even consider risk) with reasonable and competitive fees. They look for value in whatever fees they pay. They do not ignore risk, nor do they settle for average results. They expect their money work as hard for them as they had to work to earn it in the first place.
This is just one example of why you need to read the fine print. Headlines do not give you the whole picture.
If you have questions and would like to discuss the total picture and how you can position yourself to achieve the best risk adjusted return after all fees and with full transparency, give us a call and we would be glad to have that discussion with you at no cost or obligation to you. That way you can decide what is truly best in your situation. Having all the facts will empower you to make the best decisions.