Bullies don’t just torment their victims at school or on Facebook. And they don’t just pick on children—adults can be subject to various forms of aggressive emotional abuse at their workplace, their community, even their home.
In the financial world, there are bullies of a different sort. There are investment companies who continuously pound consumers with baiting ads and messages designed to scare you into sending them your hard earned cash. Yes, advertising is a purposeful act to convince someone to buy. But the manipulation of our thinking by the constant focus on our fears has become a bit of financial terrorism.
The products and services they shill range from Life Insurance and Annuities to mutual funds—all touting their own features and benefits of why you simply MUST buy their products. Or follow the advice of their employees, who of course have a hard wired conflict of interest: they only get paid when they make the sale. These ads should be required to carry the same disclosures as the drug companies listing all the potential ill effects from their treatments.
There’s also another type of financial intimidation—from your peers. “I just met with my broker and he told me about this product with a GUARANTEED 5% return.” The implication is, I’m doing it and unless you’re an idiot, you should do it too. This type of aggression thrives in the all-too-normal insecurity from really not understanding the full situation. All you hear is “5% GUARANTEED”—what else need be said?
Maybe you’ve been subjected to your own brand of self-inflicted torture. For example, those who got chased out of the market during the recession might still be licking their wounds. They’ve been hurt (albeit from their own decision to sell out in mid-pain) and are waiting for the market to correct so they can go back in and invest at a lower price. They scan the market daily—waiting, watching, examining—trying to predict the right course of action. Only in hindsight will they know whether they waited too long or didn’t wait long enough. It’s the type of internal beating that pushes some into a state of terror and inertia.
So how can you avoid these sorts of financial bullying? Here are a few thoughts to keep in mind:
- Your financial situation is unique to you and your family (even if you believe otherwise). Your goals and dreams for your success are based on what is most important to you and your values.
- Know your time horizon. If we begin with the understanding that down years are normal, flat years are normal and great years are normal, than your time frame for your goals needs to be overlaid with that variability in mind. If you look at history, recessions of varying degrees occur every 20-25 years.
- Any offer that is greater than what the market offers (for example, high interest rates) is only possible by giving up or taking on something, such as liquidity or risk. Any contract or investment that promises bonuses and other features that look impossibly wonderful deserves to be treated with a high degree of skepticism. And just because your friend signed on the dotted line, doesn’t mean you should. If nothing else, the psychology of crowds has taught us that no one likes to stand alone—there’s perceived safety in numbers. Don’t fall for it.
- Work with professionals who have no conflicts of interest and will offer you an appropriate analysis of the options you are pondering. It’s OK not to know something, especially something as complex as financial instruments. It’s not OK to sink your ship without being adequately informed and educated. If you don’t know who to talk to, look up a NAPFA advisor. They operate on a fee-only basis and must legally disclose any conflicts of interest. Transparency is good.
- Learn from experience. Review your situation and consider what worked, what didn’t and what lessons you can learn from past behavior. Remember, financial institutions earn money by getting you to buy their products. It’s fair and reasonable to assume they might have an interest in selling you something.
Stand up to the pressure exerted by financial bullies—Wall Street, the media, your friends and even you. Be kind to yourself by making decisions that are right for you for the right reasons at the right time. Welcome to being financially empowered.