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Being Mindful of Costly Promises

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All of us are human and we are, at least in some way, attracted to promises that appear to be “good deals.” The grand majority of the machinations by investors each day amount to searching for the illusive “good deal” where investment returns far outstrip investment risk. The problem is there is a virtual mountain of evidence that shows just how costly this endeavor can be.

Investors never have to look far if they want to play the money losing game of chasing returns. Investment brokers…ahem, financial advisors are on almost every corner. I stopped by my eye doctor’s office recently to pick up a pair of glasses and noticed that two of these typical investment brokerage firms were in the same little strip center literally next door to each other. I guess if you don’t like the returns promised by one firm, you can just go next door to see if they will promise even more!

The Rap Sheet

Here’s the thing. Most of these investment brokers have a long, detailed, and documented history of misleading sales practices that have resulted in billions of dollars in fines from regulators. Industry observer and author Dan Solin presented a straightforward expose’ of this here in The Rap Sheet Attraction. Solin details some of the settlements and fines levied over the past few years against Bank of America Merrill Lynch. As Solin says, “I’m not suggesting that Merrill is any worse than some other brokerage firms, but that’s little comfort to its clients”.

Solin wonders, and so do I, why investors would choose to conduct business with “rap sheet firms” when ethical evidence-based advisors are a viable option.

Related: 10 Money Maxims with Modern Twists

“For Every Promise, There is a Price to Pay” – Jim Rohn

As I said at the outset, everyone wants market returns without market risk and many brokers are happy to sell you investment products that promise to do just that. The problem is this often ends up harming rather than helping as decades of peer reviewed evidence demonstrate the fallacy of trying to outguess markets. Often these end up as costly mistakes.

If you want to have a secure financial future, step one is to recognize that investment brokers are just that. They aren’t comprehensive planners or advisors. Don’t be lulled into a sense of false comfort by the big name on the door. Start there. Ready for a real conversation?

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