I have known for some time that financial advisors are the whipping post of the personal finance blog “industry.” To be fair, some of the criticism is warranted; much like any profession, there are some bad examples, and those bad examples can an often do damage. I included advisors on my list of Thirteen Boogeymen That Will Derail Your Goals.
However, most advisors are wonderful people and they don’t get the credit from the blogosphere they deserve. I recently read a post by a friend, “10 reasons why you don’t need to have a financial advisor.” The article lacked balance and for that reason, I give you:
10 Reasons You Do Not Need
A Personal Finance Blog.
Warning: contains snark
1. Financial bloggers may not be who they say they are or hold the experience they claim. I know of several bloggers who are not who they claim; outing them is not the intent of this post. However, at least with a financial advisor you can do a background check and review their training and professional licenses.
2. Content written by financial advisors must adhere to certain standards and regulations. Advisors have to comply with strict rules regarding the balance of information, discussions of past performance, and anything that may represent a testimonial. Bloggers, on the other hand, are free to make virtually any attention-grabbing headline they see fit, with little impunity.
“paid off a ridiculous amount of debt in virtually impossible time” sure, why not!
3. Bloggers love to point out the profit motive of financial advisors as if the advisor were engaged in some sort of conspiracy, or that blogs are operated merely of altruistic reasons.
The reality is, of the two professions, bloggers are oftentimes engaged in much more underhanded monetization. Many times it takes a keen eye to determine how a blog is making money, as disclosures may be buried in massive terms of service or easy to miss affiliate link disclosure.
None of the avenues that bloggers can pursue for monetization ensure any more or less “objectivity” than any other person engage in for profit business.
Advisors must include lengthy disclosures on advertising, and when a product is sold, provide you with a giant phonebook-like prospectus of disclosure paperwork. Advisors must disclose fees, the risks and pertinent variables, and if that wasn’t enough, there is a robust regulatory environment that oversees the transaction.
Additionally, advisors have strict rules about soft dollar gifts from companies. Bloggers comparably can take on sponsored posts with minimal mention. They can get free products in exchange for reviews.
4. There may be some conflicts of interest. Advisors have rules disclosing conflicts of interest and outside business activities. Bloggers, however, are not compelled to disclose their own investments or outside business activities.
In fact, little is known about the motives and interests of many bloggers, some legitimate seeming blogs may actually be the marketing effort of some large corporation. Earlier in the year we learned student loan expert Drew Cloud was a corporate concoction.
Other blogs, while less devious, are owned by credit card companies, mortgage lenders, student loan companies, and credit bureaus. You would think these blogs would be easy enough to spot. However, these articles routinely get picked up and syndicated by major media outlets. Before you know it, content marketing puff pieces are passed off as legitimate financial content.
5. Bloggers make commissions too. Many bloggers like to attempt the moral high ground by claiming only advisors are motivated by commissions. However, most bloggers may also be motivated by making commission-based sales.
Every affiliate link on a bloggers site is an opportunity for that blogger to make a “commission” based on sale and without the disclosure requirements, advisors might have. Most high-income bloggers make the majority of their money from product sales.
Blog content is oftentimes written for the explicit purpose of driving affiliate sales. It is a common practice on many blogs to see posts about how to drive blog traffic with this produce or that service, and lets not forget the courses. (So many eCourses.) Now, keep in mind there is nothing wrong with affiliate links or selling services; providers of a service has a right to make a sale. In the interest of objectivity, I am merely pointing out the hypocrisy of what is often times written.
Disclosure: I have a few affiliate links in some of my blog posts
6. I’m going to let you in on a secret, I have said this before but it’s worth repeating. EVERYONE KNOWS ABOUT VANGUARD! Yup, that’s right if you haven’t heard it before you heard me say it here first. Everyone knows about Vanguard. Advisors know, prospective clients know, everyone knows.
Financial advisors are not engaged in some epic conspiracy with the Freemasons and Illuminati to deny the public their God-given right to purchase bargain basement investments.
Despite most bloggers beliefs to the contrary, there are reasons why investors may not want to passively index. To name just a few:
• Investors may have social, political, or religious views not supported by indexes or ETF’s.
• Investors who may own illiquid assets, such as a privately held company, or real estate and indexing may not offer enough diversification.
• Investors may not be comfortable with market risk and may rather pay an increased cost to reduce risk.
7. Advisors do more work than what bloggers and the financial media give them credit for. In particular, fixing the mistakes caused by none other than, bloggers and financial gurus. Recently, I meet a lady who was overpaying nearly $7,000 a year in taxes.
I asked her why she wasn’t contributing to her 401k to reduce her taxable income. Her response, “I read online I should pay down debt before saving for retirement.” So, she was putting an extra $1,000 a month on the mortgage.
A notable goal, but she was better off contributing to her 401k, taking the tax savings and applying it to the mortgage, win-win.
8. Financial bloggers cannot give you the emotional support you need to reach your financial goals. What happens when the market crashes and you freak out? What happens when you lose your job and you don’t know how to support your family?
There are so many “what ifs” in life. Your financial advisor is there to guide you and help you make smart financial decisions. Financial bloggers don’t have a relationship with you. They don’t understand the intricacies of your financial situation. The information you are ready may be on a case by case basis.
9. There is no training required to become a financial blogger. You don’t have to have any qualifications to become a financial blogger. You can come from any background with any philosophy and start selling it to the public.
The ease of setting up is part of the problem, anyone with an internet connection can see the hundreds of copycat blogs promoting affiliate link and decided they want in on the game.
You could write a blog about how you should sell everything and geo-arbitrage to some low cost third world country because that’s the only way you will ever retire. Sounds silly, but I’m sure there is someone out there spreading this nonsense.
10. Financial plans are extremely complicated. Financial advisors have the experience and knowledge to help anyone reach their financial goals. They understand how all the pieces of the financial puzzle fit together. They have the tools and resources you need to guide you to financial success. A financial blogger’s financial plan may have worked for them, but it may not work for you. Everyone is different and has different financial needs.
The bottom line.
Am I really saying people do not need personal finance blogs? No, of course not, that would be as ridiculous as saying people do not need financial advisors. However, it is fair to say some of the positions bloggers use to attack advisors from lack balance and objectivity.
All I’m saying is that you need to take some of the information with a grain of salt. You need to find what works for you and a plan that will fit your financial needs and desires. Partnering with a financial professional may give you peace of mind. They can support you through the ups and downs that come with your financial journey.
So, next time you read an article and decide to sell all of your assets and move to a county whose can’t pronounce, think twice and get the proper financial advice.