A reader wrote to me this month, aggravated at some TV ads. In her market, (South Carolina), a large financial company is running ads depicting people who made bad choices (didn’t save for kids’ college, didn’t plan for retirement) With a soft Southern preacher accent, the advertiser is telling them to come in and sit down with their advisers. Her impression from the ad is that the message is, “It’s ok you’ve made bad choices for the last 20 years. Just y’all c’mon in and we’ll fix it for you.” She called this message, “Pixie dust.”
I can’t discuss any specific financial company’s product in my newsletter without crossing the regulatory line, but she is right to be suspicious.
I can make my readers aware that, as human beings, we tend to value certainty over uncertainty. A lot. The financial industry knows this. Most human beings will overpay, or accept a lesser return or other tradeoff, for a product that appears to have some kind of guarantee.
We value this so much that we tend to overlook it if the guarantee has conditions, or loopholes, or possible higher costs down the road. As long as the person informing us about it appears to be trustworthy and competent, we hear “guarantee” and (neuroscientists have shown this) a primitive part of our brains says, “YES! SIGN ME UP.”
Pay attention to which part of your brain is doing the listening.
1. Ask to see the contract and the fine print. If you don’t want to review it, find someone who enjoys that kind of reading. (Hint: I’ve been reading prospectuses and contracts for over 20 years and I love it. The thicker, the better.)
2. Ask the nice, trustworthy, competent person how much they will make if you buy.
3. Ask what alternatives he or she considered before recommending this one.
4. Ask what could go wrong.
5. Ask what would be involved if you want out.
6. Ask at least one other adviser about the same product, preferably an adviser that will not make a commission on selling it to you.
Once you have your answers, then let the rational part of your brain make the decision.
College and retirement funding are ambitious goals that can be achieved in many cases, with time, ongoing financial education, informed decisionmaking, and a financial plan crafted with the family’s best interests in mind.
Perhaps that’s exactly what the advertiser is selling.
Then geez, why did they have to make it sound like pixie dust?