I typically start my day by reading emails. I generally have tons of emails from companies wanting me to sell their products to my clients. I receive emails from Real Estate Investment Trusts, Cash Value Life Insurance companies, ETF’s, Stocks and mutual funds. I even get emails trying to get me to push individual stocks and annuities! These sales pitches just aggravate me. Let me explain why. RANT WARNING!!!!
Most of the noise from the financial industry will bog down the average consumer. This noise is focused on trying to sale specific investment products which ‘assumedly’ will be the savior to the consumer’s financial needs. The average investor is not interested in analyzing the details from many of these financial sales companies. This is the hope of many of these financial sales companies. And consumers often listen to the sales pitch and make micro decisions to the detriment of their macro-financial plan. Many consumers will turn to Wall Street salespeople for a simple analysis of a product and attempt to obtain help deciding what the right product for their specific goals is. This is exactly what Wall Street and these financial companies hope will happen. For example, the industry has conditioned consumers to ask, “Should I own a pencil with a blue exterior or a red exterior?” And the Wall Street salespeople are there to give all of the reasons why one is better than the other.
I’m using a silly analogy of comparing different color pencils to prove a point. You may prefer the color red over the color blue, but many times the color of the pencil doesn’t matter. The graphite within the pencil writes the same color regardless of the exterior color of the pencil. Just like the exterior color of the pencil doesn’t matter, the particular products used within in a portfolio is not the most important factor.
If you are a consumer trying to figure out the exact product mix to meet your needs, the better question to ask is, “What financial planning concepts will grow my OVERALL net worth?” The problem many consumers face when they seek a financial product to meet their goals is they miss the simple opportunities to increase wealth. For example, many overlooking simple tax strategies, fail at budgeting or even overlook annual insurance reviews. Anyone of these items mentioned above could position your finances for a greater net worth increase over the red/blue pencil decision. All too often we focus solely on the portfolio.
Notably, our net worth could be substantially increased with a multi-point, coordinated attack on all fronts as opposed to just examining the portfolio. I love military history and strategy. A quick study of war strategies reveals a coordinated attack is far more effective than an attack from a single front. If the financial industry had their way, they would prefer you only focus on their ONE item – an attack from a single front. My point is this, focus on more than just your portfolio! Plan from a comprehensive point of view.
If you are a business owner, more than likely your net worth isn’t comprised by a portfolio of mutual funds. Instead, your net worth is probably primarily comprised of the value of your business. Looking solely at a portfolio of products the financial industry is pitching does little to affect your net worth. If you are a business owner, you MUST take a comprehensive view even more than non-business owners.
While I understand the noise of the financial world, much of it just doesn’t matter. However, many Wall Street brokers could argue why a red pencil is better than a blue pencil and vice versa. Or they will tell you that you could substitute the pencil with an annuity, a mutual fund, an ETF, etc. However, once you holistically look at your wealth, the type of investment you chose will probably not make or break your net worth alone.
One final thought…
Singularly focusing on the portfolio could be the reason we are in a society of broke people. Many people focus on one slice of the pie. My challenge to you is to think comprehensively. Take a coordinated approach to your finances and do comprehensive financial planning that focuses on your long-term goals. As you go through the comprehensive financial planning process, you will soon discover the sales pitches from the financial industry are silly. This idea that red is better than the blue or blue is better than red is just ridiculous.
That’s why the Wall Street financial industry frustrates me to no end!
Let’s stop overcomplicating our finances and make our lives at least financially simple. If you need help doing so, feel free to contact me.