Quarterbacks & Investors Can Only Take So Much Punishment

                                                                                                                                By: Brendan Magee, 10/4/100

During an average National Football League game statistics show that each team will run about 60 to 70 plays. Combined there are 130 to 140 plays that will involve a collision between eleven two to three hundred pound fast moving professional athletes. Each week players get hurt. Some are out for a week or two, others experience career ending injuries.  There really isn’t any mystery as to why so many players get hurt. There is only so much abuse the human body can take.

Investors are exposed to an emotional and psychological pounding that can be just as debilitating . I was reminded of this by Tom and Terry. We met and spoke about the pressure they were under with so much debt. They spoke about how they were feeling uneasy about having seen their savings account balances so low. They were disappointed by low returns on their retirement accounts. Worst of all they had made honest efforts to fix their problems over the last seven years, but their problems were growing worse.

Their efforts included working with a financial planner, but after selling them some insurance they hadn’t seen too much of him over the years. When they got to meet with him his advice seemed to miss the mark. They had money automatically deposited into their savings accounts, but that didn’t provide the solution. They cut back on living expenses. They went to seminars and enrolled into programs designed to improve their financial lives, but that wasn’t the answer. They spoke to business colleagues who were more affluent then them and tried to solicit their advice, but again the ship was continuing  to sink.

Just imagine if you will, when you were a student.  For every test, you studied like crazy to get good grades, but every time you got a “D” or worse an “F”. No matter how hard you tried, no matter how sure you were that this time you knew the answers to the test, you had to come home and show your parents the poor results you were getting. What a blow that would be to your pride and your and ego? How deflating would that be? Over time you could easily be in the position of asking yourself, “What’s use, I’m only going to fail anyway?”

You could easily be resigned to your fate. No College degree, no good job, no nice car, family, security, etc.

This type of resignation is what Terry and Tom were dealing with. “Mutual funds weren’t the solution.” Friends seemed to doing ok, but not us. The people who were supposed to have the answers didn’t have any. Money spent to gain the knowledge ourselves only led to more confusion and anxiety. Where should money be invested?  From where they sat, it would be better to keep the problems they had rather than experience the pain of their hopes and expectations being dashed once again.

Now unlike a football player who lines up seeing that there are 11 other players across the line of scrimmage ready to pound the living daylights out of them, the financial planning industry doesn’t  give the investor the opportunity to see where the hits are going to be coming from. Behind a maze of information and promise of a brighter financial future is the reality that the investment’s industry’s profits depend on investors being confused, disappointed, stressed out. Ironically, the catalyst for all this is the financial planning industry itself.

For example, Tom and Terry had the expectation that their financial planner was going to have advice on how to handle their finances. That assumption set them up for the first hit. The financial planner was a salesman. Perhaps he sold them a good life insurance policy, but there wasn’t going to be any real guidance or counseling beyond that. Also ask yourself, “Where the does the notion to put your trust and faith in that insurance company and all their products come?”

Their friends and business colleagues offering investment advice were basing their advice on the same failed foundation as broker and planners. They made the mistake of thinking gambling and speculation was solid investment advice, and could be relied upon. They would look at the track records of mutual funds, the price of gold, the big headlines from the cable news and investment shows and try and figure out what was going to happen in the future. Not realizing that no one can tell the future set them up for another blow. Now ask yourself, “Is there an investment ad out there that doesn’t have a stellar track record?” Couldn’t you fill the Grand Canyon with all those ads?

Then you add the stress, confusion, and fatigue of trying to figure out which of the do it yourself programs to invest in is the right one, only to find out that none of them work. After a while, Tom and Terry have this sinking feeling that the solution to our problems isn’t on our radar screen. Add all this to raising kids, running a house, doing a good job at work. Eventually, something is bound to give, and what gives, as Tom and Terry said, is the energy and will to get up of the canvas and try to tackle their financial problems one more time.

So how do you avoid being so beat up by the financial planning process? The answer is in three parts:

One, understand that financial planning’s agenda and yours are in conflict with one another. You want peace of mind. They want to sell you a product.

Two, know that if you follow the advice of the financial planning industry you are not going to be prudently investing it. You will be gambling and speculating and the results are consistent with buying lottery tickets. Your hopes and dreams may be running high, but don’t have expectations of cashing in.

Three, Understand it’s not about getting the right information. Investment success depends on asking the right questions. The right questions will reveal the truth about how markets really work, and misconceptions about investing that you may be walking around with.

Brendan Magee is the president and founder of Inevitable Wealth Coaching. With questions, comments, or suggestions call 610-446-4322 or e-mail Brendan@coachgee.com.