I have hosted retirement planning workshops and have met with families one-on-one for almost 20 years.
It has been an amazing experience to educate people, working with them hands-on to reach their retirement goals and objectives. But the last 20 years have also seen the rise of the Internet and a lot of free, reasonable-sounding information.
The cyber gold rush today seems to be personal finance and money blogs; every one with access to the Internet has the solution to your financial woes. The amount of producers of financial content is staggering and can include:
- Journalists at news organizations
- Financial professionals with a blog
- Financial firms
- Banks and Credit Unions
- Podcasters and online radio show hosts
- Bloggers ranging from the hobbyist to the professional
Today I am going to offer you a tongue-in-cheek lookt at 17 reasons you shouldn't read personal finance blogs.
17 Reasons to Beware Personal Finance Blogs
Warning: contains snark
The average blog post is 1000 words or less; a 1.5k word post is considered “long,” and most newspaper articles are not much longer than that. Bloggers and journalists operate on the assumption that a reader will spend a few minutes reading a post before losing interest.
I couldn’t write just 1000 words on why I feel hamburgers are superior to burritos, let alone explain or debate the massive body of prevailing financial research within that word count.
The nuances of complicated tax credits and financial matters can rarely be condensed into a few minutes of reading. Similarly, there are likely to be exemptions, caveats, or cautionary tales more applicable to your situation that didn't make the cut.
2. Outdated Information
Retirement planning is continuously affected by changing tax rules, changes in social security benefits, and new regulatory standards. The GOP tax bill upended what we previously knew about tax planning, and created new opportunities as well as new challenges.
For example, in their rush to pass the tax bill, the GOP expressed the need to revisit and amend the law during the year. Several states have indicated an eagerness to adjust how they collect income and property taxes as a result of the bill. It's highly likely the IRS will clarify portions of the law as aggressive taxpayers attempt to exploit specific provisions.
Additionally, in the last several years, we have seen changes in health insurance, financial regulation, and IRS rules, and the political elite has promised more changes. The only thing we know for sure is relying on outdated information can be costly.
3. Authors’ Claims May Be Exaggerated
“The greatest trick the devil ever played, wasn't that he didn't exist, rather was that he was red with spiky horns and a tail.” Charles Baudelaire
We all know to ignore the Nigerian prince or UK lottery, but what about the less prominent financial pied pipers and boogeymen that would lead us astray? There is no shortage of authors claiming they have paid off an enormous amount of debt in record time or reached financial independence at a young age.
They are willing to give you the keys to the kingdom, assuming, of course, that you sign up for their newsletter, purchase their eBook, or shop at their Amazon shop. How certain are you that they achieved these results?
Why would someone who reached financial independence retire early at 40 spend their retirement promoting eBooks, as opposed to living the dream in some tropical locale?
4. Social Proof
No one wants to dine at an empty restaurant, so if you see a packed restaurant, the assumption is the food must be good. That’s Social Proof.
In fact, social proof is perceived to be such a powerful sales tool that a multimillion-dollar industry employs ghostwriters to sell positive reviews.
Celebrities have been caught buying social media followers to build their social proof. Similarly, authors can hire influences and promoters to help ensure their content goes viral. As a result, we cannot tell from an author’s following if their success is attributable to providing excellent advice that works or rather a function of them have excellent marketing skills.
5. Lack of Practical Experience
“In theory, theory and practice are the same. In practice, they are not” Albert Einstein
I entered the financial industry when I was 18. I had received the best training in the industry and had the benefit of working at the firm founded by my parents.
At the time, I was convinced that experience didn't matter, as long as you had the latest education. Looking back, nearly 19 years later, I can see how much my feelings have changed working directly with the public: I’ve seen and learned what advice works for them and what doesn't.
Every individual has unique concerns, goals, and emotional hang-ups. Advice that may seem relatively mainstream could cause someone else’s sleepless nights.
6. Observation Bias
Observation bias is the tendency to see what we want to see and to ignore the rest. Every author has a unique way to approach a situation, to apply a specific investment strategy, or even have a particular method of research they use to research a topic.
While these techniques and plans may be useful for the author, it doesn't guarantee it will be adequate for you or your family. For every individual that struck it rich with [insert strategy of choice], there is someone who has failed using the same approach.
7. Bad Ideas Are Easy To Sell
There is a disconnect between the advice that people want to read and the advice they should actually follow.
Case in point: Newt Gingrich and his moon “sex” base. As the county was beginning to recover from the great recession, it would seem that proposing to spend billions of dollars on a moon base for honeymooners to experience weightlessness would be political suicide.
Rather than getting laughed off the stage in 2012, Newt Gingrich received thunderous applause, and in 2015 Jeb Bush said Newt's idea was “cool.” We see in politics, the more outrageous, the idea the more people seem to love it.
Consumers don't just make this mistake when voting in the polls; they make it when voting with their wallets as well.
Headlines like, “Pay Down Your Debt Slowly but Surely” and, “Build Up Wealth Consistently and Safely Over Time” are unlikely to receive much fanfare. I once asked a journalist why he hated a particular strategy, and his response was, “I don't hate it, but decisive headlines get the clicks.”
As a result, much of the financial content produced is written for consumption, not necessarily to provide actionable advice.
Bloggers VS. Advisors
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 often do damage. I included advisors on my list of Thirteen Boogeymen That Will Derail Your Goals.
However, bloggers can be equally as terrifying and do as much damage to your net worth as a bad advisor. Here some reasons bloggers may be worse than those evil financial advisors.
8. Many Money Bloggers May Not Be Who They Claim
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.
9. No Regulatory Oversite
Content written by financial advisors must adhere to specific standards and regulations. Advisors must 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!
10. Money Bloggers Make Money
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 often involved 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 to monetize ensure any more or less “objectivity” than any other person engaged in a 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.
11. Bloggers Don’t Occupy The Moral High Ground
There may be some conflicts of interest. Advisors have rules disclosing conflicts of interest and outside business activities. Bloggers, however, are not compelled to reveal their investments or outside business activities.
In fact, little is known about the motives and interests of many bloggers; some seeming legitimate 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.
12. Affiliate Sales are Still Commission Sales
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 blogger's site is an opportunity for that blogger to make a “commission” based on the 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 often 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 product or that service, and let's 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 oftentimes written.
Disclosure: I have a few affiliate links in some of my blog posts
13. Everyone Already Knows About Vanguard
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 hadn’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.
14. Money Bloggers Don’t Really Know What Advisors Do.
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 overpaid 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.
An important goal, but she was better off contributing to her 401k, taking the tax savings and applying it to the mortgage, win-win.
15. Personal Finance is Personal and Even Emotional
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.
16. No Training Required
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 links 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.
17. The One Size That Fits All, Usually Fits Poorly
Financial plans are incredibly 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 position’s bloggers use to attack advisors from lack of 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 your assets and geo-arbitrage to a county whose you can’t pronounce on the advice of some blogger, think twice and get the proper financial information.