Wednesday, 02 April 2014
Retirement Investing Advice (?)
Undoubtedly you see as many financial services commercials on TV, in print and online as I do. In addition, I get dozens of pitches every year to review advice books about retirement investing or to interview so-called experts in the field.
The reason you have never seen any of that reported here and likely never will is that I ignore them all because they never address my two most persistent questions:
One, just who has enough money to do all this investing? According to the U.S. Census Bureau:
”Real median incomes in 2012 for family households ($64,053) and nonfamily households ($30,880) were [not] not statistically different from the levels in 2011.
“A comparison of real household income over the past five years shows an 8.3 percent decline since 2007, the year before the nation entered an economic recession.”
And two, what do these experts really know? After all, none of them warned us about the crash of 2008.
Sometimes I have wondered if I am not being too harsh in thinking that about 99 percent of all investing advice as suspect if not fraudulent. Who am I to make that judgment, I would ask myself. Money management is certainly an important part of aging, something that might be useful to cover on this blog.
So I was relieved to have my reservations confirmed yesterday by an economics blogger I respect and have followed for years. James Kwak is associate professor of Law at the University of Connecticut School of Law and co-founder, with Simon Johnson, of The Baseline Scenario blog.
Here is part of what he wrote yesterday:
”The underlying problem with financial advice - besides the fact that most of it is wrong, conflicted (in the conflict-of-interest sense), or covert marketing - is that, even in the best case, it rarely works.
“The underlying financial problem that most Americans have isn’t that they buy too many lattes or pick the wrong stocks. It’s that they don’t make enough money to begin with, at a time when many necessities like health care and education are getting more expensive.
I laughed at his line about “too many lattes.” I once saw a famous financial guru on television tell viewers in all seriousness that anyone could have enough money for retirement with just one easy change in lifestyle: make all their coffee at home.
Kwak is reporting on a book by Helaine Olen, Pound Foolish which, he says, is
”...a condemnation of just almost every form of personal financial advice out there, from the personal finance gurus (Suze Orman, Dave Ramsey) to the variable annuity salespeople to the peddlers of real estate get-rich-quick schemes to Sesame Street‘s corporate-sponsored financial education programs...
“A lot of what’s going on is just semi-sleazy entrepreneurs trying to make a buck, taking “advice” that is equal parts routine, wrong, and contradictory and packaging it into attractive-looking books, TV shows, and in-person events.”
Given all that, Kwak wonders why personal financial advisers are as ubiquitous as they are. He says Olen “suggests that we live in an age of stagnant real wages and rising inequality” and
”Add that to,” Kwak continues, “a culture that fetishizes individualism and rejects government support programs, and you have a market that is ripe for self-proclaimed gurus or self-interested advertising campaigns that claim that you can get ahead by (insert your choice) drinking less coffee, or going into more real estate debt, or buying a variable annuity, or picking the right stocks.
“The governments (state and federal) that promote financial education are like Marie-Antoinette advising people to eat cake; if they could eat cake in the first place, they wouldn’t need financial education.”
That and the rest of what Kwak reports of Olen's book is why you still won't be hearing about anyone's investing advice or seeing interviews with investing “experts” on this blog.
At The Elder Storytelling Place today, Janet Thompson: Pearls and Princess Pumps