Retirement Advice: Whom Do You Trust?

by: Income Machine

Summary

The EBRI completed its annual Retirement Confidence Survey and I discuss one of the findings.

Where do you turn for savings plan advice and what conflicts do those sources have?

The savvy DIY investor is on this site already, but Seeking Alpha has incredible potential as a platform to grow and to educate folks on investingto achievefinancial security.

Trust is a funny thing. We trust stoplights to function perfectly preventing accidents each day. We trust the dentist to fill our cavities and protect teeth from further decay. We trust the mailman to deliver confidential items to our mailboxes. But can we trust financial professionals with our life savings? Can you trust yourself to be a steward of your family’s net worth? Where do you turn for sound advice about retirement and savings plans?

With the fiduciary rule currently in limbo, it’s incumbent upon consumers to take matters into their own hands. Unfortunately, the data shows that such initiative does not a sound retirement make.

The Employee Benefit Research Institute (EBRI) released their 2017 Retirement Confidence Survey recently and I want to highlight an important finding.

The topic pertained to where individuals obtain advice about retirement savings.

Let’s take a peek one-by-one at these resources. Far and away the most popular place is the retirement plan provider. Considering many retirement plans have been sued for not acting in the best interests of their clients, I think it’s fair to pity most of those 67%. The second choice is an independent financial services company or advisor. This selection is perhaps less egregious than the first error, but here’s a good quote about these brokers from the Devil’s Financial Dictionary: “BROKER:…buys and sells stocks, bonds, and mutual funds, and other assets for people who are under the delusion that the broker is doing something other than guesswork.” Aka: Stay. Away.

In fact, in this exact same Retirement Confidence survey, only 12% of workers strongly agree that professional financial advisors act in their best interest. Yet it is those very folks who claim they’re seeking advice from these professionals. To me that’s like recommending a mechanic by saying, “Yeah he’s pretty good. Forgot to connect the brake pads last time but other than did a solid job.”

The third option is a financial services company retained by your employer to provide advice. Same problems as above. You may be better served using dollar bills as kindling for heat in the winter. A relative, friend, or co-worker…well…we each have our own horror stories about how a ‘hot tip’ preceded a rapid loss. Stay away from folks with hot tips like you stay away from anything else with a hot tip (like a match). The fifth option selected was the employer. Most employers are not doing nearly enough to educate members about how to prepare for retirement. You’d be lucky if you get an hour luncheon from a paid third-party but at least you’ll nibble on some free snacks.

Finally we turn to online advice. Here we can see Seeking Alpha’s (SA) astronomic potential as a leading interface. Only 4% of folks are presently very likely to seek advice via online platforms. Fair enough. A lot of online advice is garbage or as useful as a diaper rash.

Having said that, an inherent advantage SA has is an abundance of topics and authors who are investing with skin in the game. If authors have been consistently wrong, commenters caution the reader by reminding them in the comment section (as they should). Published authors are required to disclose affiliations and positions. All stocks covered offer bear and bullish theses sans censorship. Fundamental analysis provided with citations encourages readers to verify the sources and dig deep into a company’s financials.

SA is not perfect, but it continues to evolve and improve and empowers folks to learn an abundance of investment information with a critical lens for free. The About Us Section states: “Seeking Alpha is a platform for investment research, with broad coverage of stocks, asset classes, ETFs and investment strategy. In contrast to other equity research platforms, insight is provided by investors and industry experts rather than sell-side analysts.” I expect this model to continue to grow and the average investor will be better off for it.

We reach the end of the list, but there’s one big omission from the chart…yourself. What about the folks who look inward to protect their capital and grow their income streams? Who will care more about your money than you?

Source: Image

Gary Belsky recently penned a post highlighting the perils of a DIY approach to your investments: “Despite the growth of index funds, millions of amateur investors still actively buy and sell securities regularly despite evidence that even professional investors are no more likely to beat the market than monkeys throwing darts at securities listings.” The mental image of that is hysterical if you stop to think about it but evidence backs it up.

Belsky laments the inherent difficulties preventing individuals from navigating the markets proficiently. The challenges investors must overcome include: overconfidence, hindsight bias, attribution bias, and confirmation bias. It must be that very bias that allows me to claim that I am the most handsome investor who ever lived (scratch that -- wife said Jack Dorsey).

The post resonates because if you execute a lucrative trade, it’s not necessarily a prelude for more successful trades to come. It’s common knowledge that yesterday’s winners are often tomorrow’s losers. Reading reinforcing commentary often produces confirmation bias blinding investors and dismissing alternative opinions. And then of course there is the idea that we hold ourselves in such high esteem that of course we will make prudent, responsible decisions. It’s ME we’re talking about.

Conclusion:

Is finding sound advice a lost cause? Where can investors turn to obtain such advice devoid of conflicts of interest or lopsided pieces with hidden agendas? There is no panacea or universal answer but this website is a good place to start. Tesla (NASDAQ:TSLA) is ground zero for the bull vs. bear divide and each day numerous posts dissect the inner workings of the BEV maker. Apple (NASDAQ:AAPL) is another great example that elicits wonderful commentary and fundamental analysis from both sides of the table.

Despite the internet being widely adopted across the world, not many folks are seeking information online (yet) to help them achieve financial security. Reviewing the wealth of information here with a critical eye is an excellent starting point.

Disclosure: I am/we are long TSLA, AAPL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.