By Andrew Teasdale, CFA
Special to the Financial Independence Hub
What do people look for in online financial content, especially a site dedicated to Findependence? Are they looking for technical information on pensions, investments, private equity, complex products, opinion pieces, confirmation of their own decisions or their advisors/advisers, reassurance in times of financial crisis, or something else?
Personally I find basic technical information, beyond a point, boring. You can find basic information anywhere: just type in the key words into your browser and bam! Likewise, there are now books galore on every facet of personal finance, so much so that I fear we have long ago overloaded on dry rudimentary comment.
Endlessly repeated content
Unless you are new to the sphere, by now many will have spotted that most financial content is “repeated” ad infinitum. Pretty soon we will have those vast repositories of description and repeat for access. Perhaps a repository of the basics is worthwhile, but surely this is not what people are first and foremost looking for when they tap the link to this type of site?
I look for something new in the backdrop, something different, interesting and challenging, whether I agree with it all or not. I look to be “honestly” and knowledgeably entertained, and believe that is what most people are looking for once they get past a certain learning threshold.
That said, I would certainly be interested in finding out just what drives people to sites like these, for they must accommodate the newbie, the experienced, the thrill seeking or the forlorn bookworm.
Costs of products and advice
Clearly, there are important issues that need to be hammered out at the dry end of content. These include the importance of costs in products or advice you receive as well as what to look for in advisers/advisors. There was one important investment product that I reviewed some time back whose entire reason for being was to provide a guaranteed minimum investment return with an alluded-to good potential for equity market upside.
The problem with the product was its cost structure made it in many scenarios a far higher-risk venture than a plain and simple 100% allocation to a low-cost equity index investment: i.e. there was no effective risk management and limited potential for after-cost return either. The marketing illustrations were impressive, I must admit, and there were very strong hooks attached.
I used the term “honestly” a few sentences back and think this is an important point. It is rare for a product-oriented financial services company to tell potential customers that markets are too fully valued to be considering new investment in them or that technology or small caps are now cyclically heavily overvalued; it is this constant tug between the agenda and the reality that surely should be a theme in engaging financial content.
Be wary of Marketing claims
It is likewise important that investors and advisers/advisors be wary of claims made in marketing literature. Back in the U.K. in the late 1980s there were some tax dodges you could access with government bonds; one of these dodges was run by an offshore bond management company.
When I reviewed the information for the company for which I worked, I could not work out how it was running the operation and thought NO! It later turned out it was a shell operation, a fraud, but a fraud used by a number of respectable companies for their clients.
Likewise, the risks of a collapse of asset backed commercial paper/collaterized mortgage investments during the financial crisis should have been evident beforehand to battle-hardened professionals, and I did pen a note on this back in 2006. Unfortunately, many who should know better choose neither to act nor think and this is part of the problem for ordinary investors. The many realities of investment risk and return are not often told for fear of turning off investors.
Do you want assurance or reality?
So I ask you, what do you want: to be assuaged or to be challenged with reality?
There are far too many ways in which investors can be led astray amidst the maze of fine illustrations and wordage that are often built in order to mildly deceive. Few people will pick these things up, which is why I believe objective, critical, free-thinking content is important.
And it is not just the inexperienced, for at the heart of the financial crucifixion many investors have endured since the late 1990s there has been a tug of war between those who believe markets and economies are efficient and run by rationality and those who believe that at times they are not, but influenced by self interest and greed.
Many policy mistakes have been made at all levels of the financial and regulatory system, partly because it is too complex to understand, but also because it has been too risky in terms of career prospects to stand up and independently raise a red flag. How many of our regulators are actually standing up and saying best interests standards should be introduced as a staple of retail financial advice in North America? Not many and a moot point!
Do it yourself or hand it over?
In this world we can either try and simplify things to a point that we can manage and understand, if we can get through the myriad of conflicting views and data, or hand over to someone or something that we believe can. But this is a whole other story!
Perhaps help in defining the process that will allow investors to make life-affecting financial decisions is part of the reason why the Findependence Hub exists, but it is getting there that matters, is it not?
Andrew Teasdale, CFA, originally from the U.K., is an economist and a portfolio planning and management expert. Since 2006 he has been an independent consultant, operating outside the financial services industry in Canada. He has a strong focus on investor advocacy, in particular the need for the introduction of best interest standards and greater accountability for advice in the Canadian retail financial services market place. You can find his Depth Dynamics blog here or follow him on Twitter at @depthdynamics.