Consider the Source of Financial Advice
It’s been a few years but that sleepless night in a run down San Francisco hotel still haunts me. I selected the room after reading several five star reviews online. I learned from that experience to pay less attention to the stars, and more attention to the reviewers. Opinions are a very relative thing. I suppose for people accustomed to staying in cheap hotels in big cities, finding a place that changes the sheets for every third visitor may be considered a big plus.
A good client called me this week after reading an article in a national senior magazine about certain types of investments that the author claimed no senior citizen should ever own. As I read the article I found numerous glaring errors in both facts and logic and began to wonder how the author could have ever been chosen to write for such a respected publication.
In an attempt to determine why the author was apparently so biased against certain investments, I decided to do a little research on him. I eventually found a book and several other articles he had written. It turned out he has a very unique point of view regarding retirement. He describes it as a time when individuals should remove all risk from their investments by putting almost all their money in CD’s and money market accounts. He teaches that retirees err when they try to earn income from their assets, but should instead plan on living off the money itself, simply spending it down to zero by the time they die. He admitted that his system would eliminate most potential earnings, but that retirees should just learn to live on less in order to avoid risk.
His simple retirement model involved dividing the total value of your account by the years left in your life, and then spending it down accordingly. He claimed his “risk-free” method would free people from market worries. Of course the likely downside of his non-investment philosophy is significantly less money to live on and virtually no protection against inflation.
I realized that he was not just opposed to certain investments but really disliked all of them when it came to senior investors. Though his method may work to some degree on paper, in practice there are likely few individuals who would be able or willing to reduce their lifestyle to the level his system would require. Unfortunately, the mass audience for his advice was not made aware of his overall philosophy since he did not disclose it.
In shopping for hotels, I have learned to consider the reviewer before putting much weight in his or her reviews. When planning your investments it is good to read many things, but consider carefully the source. Confirm that the person giving the advice has similar goals and values as you do. Otherwise you may find your retirement portfolio looking much like that San Francisco hotel room; Perfectly suitable if you consider the all-night country music from the adjoining bar a big plus, but very unsuitable if you were actually looking for a good night’s sleep in recently cleaned sheets.