Regrettable Financial Decisions

Opinions about how to invest are everywhere online these days, and that’s starting to lead to some problems. The recent study conducted by the CFP board, this is a group that oversees a certified financial planning credential, it’s kind of the gold standard in the financial community, in this survey, they reported about 57% of people have made decisions that they’ve read online, and they’ve regretted it later based on misleading information. Of that group, about nine out of the half of them reported some sort of financial loss, in some cases over $1,000 based on this misleading information. Now, when we look at the information out, there were inundated with ads, whether that’s TikTok, LinkedIn, Facebook of all this information. And everybody, of course, is an expert. The problem that we’re seeing is people are mistaking popularity with actually having credentials and the expertise in these different areas. You know, just the other day, I was I was reading a post on LinkedIn of somebody that I know locally that works in the financial area, and they were talking about life insurance, and they’re talking about if you want to be a high net worth or ultra wealthy American, you need to be using a whole life insurance policy. And I started to laugh because in this article, they’re talking about Jeff Bezos and how he’s probably using these types of policies. I started thinking, I don’t think Jeff Bezos is is wealthiest because he put $100 a month into a whole life policy. So it’s like, let’s start to take a step back and actually look at what the message is in some of these situations. First off, this individual doesn’t have a college education. Not saying that’s a problem, but it’s just something we need to be aware of. They don’t have a financial advising license. They actually haven’t test those tests. What they do have is an insurance license. So of course to them every problem the solution is going to be by insurance policy because that’s what they can sell. So this individual is trying to of course sell more policies. Nothing wrong with that. But they’re misleading individuals, putting them into a product that is going to have not a bad outcome but not necessarily meet their goals very effectively. And he’s putting that out there so that everybody can see it. Another scenario I met with someone recently that they’ve been a viewer of the show. They’re big on on Dave Ramsey. They’re coming in and they want to buy mutual funds. They’re younger. They’re starting out saving. I’m not saying mutual funds are bad, but this idea that we’re giving general advice from Dave Ramsey, if everybody should have mutual funds isn’t necessarily appropriate. Now, as we kind of dig into this situation for someone starting saving, well, mutual funds tend to have a little bit higher cost, especially if they’re actively managed. They tend to have higher ticket charges depending on what platform you’re you’re buying them on. And then thirdly, if you’re owning in an after tax position, you might have some phantom income or gains sort of uncontrollable tax impact. For that individual, we probably want to think about more of a passive, cheaper investment approach just to get those assets working for us as much as we can. Now in both these scenarios, I’m not saying the advice that was given to them was necessarily wrong, but it wasn’t tailored to their financial situation and their specific goals. And that’s the issue that we’re starting to see is we have a lot of individuals coming in making decisions based off these different platforms and this information given out, and it’s not tailored to you. So we want to take a step back and we need to be thinking about okay, let’s meet with someone that’s actually without a license advisor that can sell us multiple different types of products that maybe they’re a certified financial planner like myself, or they have a tax team like we have here at Centennial Wealth Advisory, so that we can look at all the pros and cons of how these different products work, how these different strategies work. But more importantly, work with you to start to develop that overall financial plan. Because we want to start to avoid is taking just pieces of all this information out there and trying to put it together ourselves and not fully understanding what can happen to these policies long term. Like in that whole life policy example, if someone starts that policy up, they’re going to be committed to that for a long period of time. If they try to cancel that early, they might lose all of the money that they put into that. So some of these decisions around like pension and Social Security, life insurance, they’re somewhat irrevocable. We need to make sure we have an expert that’s helping us make those decisions, not just pulling data from different sources and quoting it, trying to say that’s what Jeff Bezos do, because let’s be honest, he’s not buying a whole life policy.