“Financial Quackery” is one of the main reasons most people struggle financially. This video is my attempt at humour to explain what to look for to get real advice, rather than the typical industry foolishness pretending to be advice.
If you prefer to read it, here is a transcript of the video:
Importance of a Comprehensive Plan with One Advisor
What do you mean by “financial quackery”?
Quackery is the reason people have trouble getting real advice. It’s everywhere in the financial planning world.
If you get financial “advice” from someone that doesn’t look at your entire financial picture and your specific financial goals – that’s quackery.
Let’s look at a typical financial planner meeting. They start out with some chit-chat to develop rapport, a risk tolerance questionnaire, & then they recommend investments in the 1st meeting. That is quackery.
Can you imagine that in any other field? – Let’s say you meet with your doctor. He/she starts off with some chit-chat to develop rapport, goes through a pain tolerance questionnaire and recommends drugs for you. That would obviously be quackery.
Why exactly is it “quackery”?
Why? No examination. No medical tests. No medical history. And not even the best treatment, but the one that’s within your “pain tolerance”.
Whether in medicine or financial, quackery is selling products or services without using accepted standard methods.
In the financial planning world, most “advice” is quackery, because it is given without using the accepted 6-Step Method, which includes knowing your full financial picture & your goals.
How does quackery ruin your retirement plan?
Here’s how your retirement plan is ruined. You go to a financial planner (quack), do some chit-chat, and fill out a risk tolerance questionnaire which says you are a conservative investor. So the quack recommends you diversify into conservative investments.
What’s the result? It sounds okay, but you now have a low risk of investment ups and downs, but you have a 100% chance of failing to have enough money for the retirement you want. The quack does not know your goal and neither do you.
How do people get real advice?
We’ve found that having a written plan is critical so you know what you need to do to have the life you want.
A real plan will let you make an informed choice.
Let’s say you need to be in an important meeting in California tomorrow. You can fly, drive or walk to California. You sit down with a trip advisor, who does some chit-chat and fills out a “fear tolerance” questionnaire.
You have a low fear tolerance so the trip advisor recommends you walk. This is obviously quackery and bad advice. You will definitely miss your meeting.
Real advice would explain the options together with the goal. If you walk, you are safe, but you will definitely miss the meeting. You may be able to drive, but you’ll have to leave now and drive through the night. It’ll be a lot of work.
Or you could fly. Flying gives you by far the best chance of being at the meeting. Now let’s discuss your fear of flying and how you might deal with it.
With that information, you can make an informed decision. Walking is like GICs, driving is like bonds, and flying is like investing in the stock market.
Is the idea of “one advisor” important?
Definitely; if you have multiple advisors or do part yourself, then nobody is looking at the overall plan. What you end up with is multiple people trying to sell you something.
Nobody knows your goal, nobody knows your overall tax position, nobody knows how your investments are allocated, and nobody gives you objective advice on what you should do next.
Then you are also tempted every year to invest new money with whoever did best last year. This means you are systematically buying high every year. With multiple advisors, it is always quackery. You will never get to California.
To be confident in your future, you need to have only one advisor who’s responsible for your entire financial plan.