In a previous article, I highlighted the impact of the financial media in the operations of the Wall Street System (WSS). However, as much as the Financial Media is a major part of the WSS, it would be difficult for it to operate on its own without the financial product companies. In this article, I will be walking you through some of services or products which these financial product companies offer and which I believe to be the reason why many retired investors have known nothing but frustration since investing by means of the WSS.
Within the WSS, the financial product companies for the most part are the ones that create products such as: mutual funds, annuities, insurance products and the like - and these are the same companies that buy the advertising services of the financial media companies. Have you ever noticed that many of the 'guests' or those interviewed by the media 'just happen' to be associated with those buying the advertising?
When seeking investment planning advice for your retirement wealth, it is important that you first understand that, the WSS financial product companies are there to make a profit. Because they are held accountable by their shareholders - they therefore need to make as much profit as possible. That means that they have to continually come up with new products and seek ways to keep selling these products and generate new business in order to support their massive infrastructure, pay exorbitant salaries to their executives and still have profits left over for their shareholders. The pressure to keep growing and increasing profits can easily affect the kind of financial products which they recommend to potential wealth investors for their retirement wealth. It can also influence the products they create.
Once again, I will try to explain this using a non-financial analogy. Assuming that I am CEO of the Coca Cola company and I make money by selling beverages people want to drink. Will I make more money selling what people like or what they need? For instance, a vegetable drink like V8 is probably better for most people than a can of Coca-Cola but, as consumers, we tend to buy more soda like drinks like Coke than we do V8. So am I going to tell people that they shouldn't buy my product because it's not as good for them as the vegetable drink? Certainly not.
In the same way, these financial product companies over the years have sought to sell their products to uninformed wealth investors. The products which they design are based on what the consumer would like to buy and not necessarily of what works. If retired investors are nervous about the markets and are looking for guarantees, the product companies (if they can) will design a product that has guarantees. If someone wants lifetime income, they'll design a product that has lifetime income.
Panic Free Retirement Investment Plans
Studies have shown that investors tend to react emotionally and buy and sell at the wrong times. In other words, when their buying is motivated by panic, this is when they are most likely to buy a product with guarantees; and the reverse is true, for after markets have begun doing well for a while, investors see the great returns and then want the terrific growth they see in the market.
Since financial product companies design what sells instead of what an investor really needs, investors are encouraged to buy the wrong product at the wrong time. The financial product companies do well when this happens. The investor? Not so much.
My advice is, investors would need to avoid the 'hot product' being pitched by these companies if they expect to make sustainable profits with their retirement investments over time. That's why research shows that those investing in financial company 'products' have not done well.
Stay tuned for my next article, in which I take an in-depth look at financial sales forces and why they don't work for investors.
This article is an excerpt of the latest book of Jeffrey Voudrie, How Successful Investor's Tripled The S&P 500: The Secret To Stop Playing By Wall Street's Rules, End Your Frustration, REGAIN Control Of Your Finances and NEVER Have To Worry Again. To find out more about this book and others in The Retired Investor's Survival Guide Series, pleaseclick here:
Jeffrey Voudrie is a Certified Financial Planner and nationally recognized financial advisor. Jeff has been in the financial industry for twenty-five years, and has been interviewed by The Wall Street Journal, CBS Marketwatch, Kiplinger's, The London Financial Times, The Christian Science Monitor, CFO.com and Financial Planning Magazine. For more information on Jeff, please visit: www.jeffvoudrie.com or www.commonsenseadvisors.com