Not too long ago, I saw a program on CNBC about selling via infomercial. Even though I’ve never availed myself of the opportunity to “act in the next five minutes and enjoy free shipping”, I found the show interesting. It featured Ron Popeil and others who invent clever gadgets and then make infomercials to sell them to the rest of us. The show made the point that infomercials are typically well produced making each item offered appear useful, unique – and unavailable elsewhere. Of course, without a great infomercial, the products would never sell.
I am not a gardener but I have heard that a tomato plant which produces ten pounds per season is doing pretty well. A friend went to visit his father the other day and noticed two shot glass-size cups on the window sill. When he asked about them, he learned that they were tomato plants which, according to the infomercial, could be counted upon to produce 60 pounds per plant per season. Time will tell if that particular offer meets expectations.
In addition to plants and pocket fishing rods, you can also find investment advice on television. Regular readers of my articles know that I don’t watch much TV but new acquaintances are sometimes surprised to learn that I don’t tune in to Jim Cramer every night to hear his investment ideas. Mr. Cramer was apparently a successful hedge fund manager (apparently because hedge funds are subject to very little regulation so their true performance is difficult to accurately determine) but, more critically for television, he is entertaining. According to research I have found, his investment advice has not been any better than average, although he certainly does make some good recommendations. The article I cited is not the only one which evaluates his skills. According to Google, the next most popular story about him comes from a source I consider to be one of his competitors, the Motley Fool. Like Mr. Cramer, that organization provides free investment advice in order to bring viewers to its articles and website. Those viewers make it possible for the Motley Fool organization and CNBC to sell advertisements. Of course, there’s nothing wrong with selling ads but when that’s the reason a site (or column or infomercial) exists, it certainly increases the value of an entertaining presentation.
You may be familiar with two additional sources of investment advice: Suze Orman and Dave Ramsay. Ms. Orman hit it big on Oprah but began her career somewhat more humbly, selling insurance in California. She now receives fees from the annuity products she endorses which makes me wonder if her advice can be truly unbiased. Mr. Ramsay offers very practical advice, then recommends local salespeople to implement his strategies. These individuals apparently agree to follow his approach in working with their customers but before buying from one, you might want to ask if any of their sales commissions are shared with Mr. Ramsay. While both of these nationally known figures have undergrad degrees, neither has earned professional certification in financial planning. That makes me a bit unsure about why their advice should be considered inherently more trustworthy than that available through any other infomercial, selling any other product.
Information is critical when making investment decisions. Whether you count on a guru or subscribe to professional publications, all the research in the world won’t guarantee success because investments don’t always perform as expected. Warren Ward Associates utilizes a “slow but sure” approach, employing the Nobel prize-winning strategy known as Modern Portfolio Theory. We have always agreed with famed economist Peter Bernstein that the future is unknowable, so we allocate investments among a range of categories. The downside of this approach is that if one segment does extremely well, i.e. technology stocks in the late 1990’s or housing stocks in the recent past, our clients are going to miss out on some of the excitement. On the other hand, when the inevitable correction follows each bubble, our clients receive protection through the diversification, again avoiding some of the excitement.
I believe that most people who offer free advice do so in hopes of selling something, whether it’s products for the home or investment products. WWA’s only source of compensation is the fees paid by our clients, so our advice is never influenced by our desire to sell anything. If you’d like to receive unbiased advice, instead of a sales pitch disguised as advice, give us a call.
