Lies My Financial Planner Told Me

Have you noticed that whenever you talk with a financial planner they talk in terms of certainties. But when you sign the investment documents they point out that there are no guarantees the things they told us before may apply?

Do you go to a car showroom and hear them tell you all the great things about their cars but as you drive it out of the showroom do they make you sign a waiver and tell you the car may not work as stated. It may stop as soon as you leave the driveway, the doors may fall off, the engine may not reach the speeds they said it would.

I’m sure if they did that they would sell no cars and probably be charged with fraudulent misrepresentation of a product. They have written guarantees that support the claims made about the quality and performance of the car.

In the financial industry they have companies that rate Mutual Funds and you are lead to believe a 5 star rated mutual fund is better than a 4 star rated fund. Of what value is it to us poor investors if these ratings are really meaningless? The recent sub prime debacle has made a mockery of any sort of rating from many of the “reputable” agencies.

The bundling of good debt with bad debt led to large corporations trading in the sub prime mortgages and making massive profits all based on rating for this instruments. If you mix food with poison – you still get poison. I am sure this was known to many of those involved in this trading scam. But Wall Street ego’s ensured it continue because most of those involved probably thought they could get out before anyone else, once the whole edifice started to crumble.

But back to lies my financial planner told me…

I don’t believe many of them actually intend to lie, they have just been brain-washed into thinking and saying things as if they are facts. Here are some of these ‘facts’ stated as certainties.

The Market Always Comes Back

The market Always Goes Up

The long term returns on the stock market are 11.26%

Over the long term Stock market returns always beat inflation

A well diversified portfolio will protect your nest egg

Buy and Hold will always provide you with superior returns

Timing the market never works

Some of these “facts” can be true in the long term, but it may not be your long term. They need to be related to you and where you are in your life. As a Baby Boomer starting your retirement, you need to get into the long run for some of these “facts” to become true. There is a fundamental change in your financial situation when you stop working and begin taking a pension from your nest egg. You need to consider retirement as year zero despite the fact you may have been accumulating your nest egg for 20-30 years.

In 20 years after you retire you will be in your long term but as you start out you are like an aircraft about to take off. If you have accumulated a decent size nest egg, in the main your take-off should be fine, but there is higher risk during the take-off than when you are at your cruising altitude and in level flight. The same applies to starting to live off your nest egg. Short term losses can have a dramatic effect on the longevity of your nest egg to the point where you may have to abort your take-off.

So just be aware of what your financial adviser is telling you as you go into retirement. Question every statements and make them put in writing any claims they make for your nest egg.

2 Responses to “Lies My Financial Planner Told Me”

  1. […] Nik Cubrilovic wrote an interesting post today onHere’s a quick excerptAs a Baby Boomer starting your retirement, you need to get into the long run for some of these “facts” to become true. There is a fundamental change in your financial situation when you stop working and begin taking a pension from your … […]

  2. Hi,

    I am currently doing computer work for a respected author. Her latest book, How Not To Go Broke At 102, Wiley 2008, contains relevant information about financial planning for retirement. Go to the website at http://www.hownottogobrokeat102.com for more information, and to read an excerpt of the book.

    Ian

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