One axiom of the world is that people are concerned with their finances because money enables them to maintain their lifestyle. Everyone is alert for opportunities, especially with their investments. Inevitably some people distort this interest and prey upon the individual’s desire to do well with their money.
Some recent radio commercials are examples of this attempt to exploit.
Usually the commercials tout that these promoters will share secrets, tricks and little-known techniques if you buy their product. Sometimes the offer is even free! Remember there are few, if any, undiscovered secrets in the world of investments and taxes. The mere fact that so many people are on the hunt for ways to make money reduces the chances of any secrets or tricks.
Suppose someone had a special skill or “secret” to do well financially. Soon others would notice, reverse engineer and copy the method. The interesting question is how many others need to copy the method before its special value disappears completely.
The answer is: not many.
You should be skeptical of anyone offering to share secrets because that is not in their best interest. So what is the real reason for their pitch? Probably not altruistic.
Another offer has been to reveal little-known “tax tricks.” The tax code is well-known, researched, read and published. Experts have explored every obscure wrinkle of the Revenue Code. CPAs and attorneys offer advice on the details. The idea of a “little-known trick” is not credible; and might attract the attention of the IRS if it is too aggressive.
Once again, be skeptical and cautious.
Over the past year or so, a burst of offers proposes to find ways to increase your income from Social Security. Again, the rules are well-known, researched, read and published. I have seen the discussions and found that the explanation is very lopsided with an incomplete analysis. Indeed, in my humble opinion, the pitch is just an attempt to gain your attention that leads to a product sales pitch.
No secrets here, just pitfalls.
Planning for retirement income can be daunting, so another appeal is a “special” method that will “guarantee” a steady income for life. Few things in life are guaranteed and this pitch is no exception. Someone must bear the financial risk for the performance of the money and how much it pays and that person or company will demand to be paid for bearing the risk.
Sometimes these offers of steady income use confusing words. For example, most people consider income to be money earned on an investment not the principal. But many of the “steady income” offers include a meager interest rate and giving back your money, your principal, and calling both income. Promising security should be far more than just giving back the investor’s own money.
Finally there is the offer to earn very high interest rates on “a little-known guaranteed” investment known only to wealthy, sophisticated investors. Really? Why would they share such an extraordinary opportunity with others?
So many eager investors in the world make the capital markets very efficient. Competition is stiff. Extraordinary opportunities are rare. No investment will pay high return without high risk. Why would the company needing the money pay any more than necessary?
If it were simple and readily available everyone would do it. Be skeptical. Investigate before you invest. If in doubt, seek professional advice.
Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from UC Berkeley. Contact him at email@example.com.