Debunking Financial Myths And Deepening Understanding

Engaging Clients To Dispel Myths Through Education, Addressing Emotional Factors And Navigating Information Overload

In today’s digital age, influencers on platforms like Instagram and TikTok wield significant influence over the investment decisions of millions of Americans. It’s incumbent on investors to use discretion as to whether an influencer is conveying a fact, an opinion or something outlandish. It’s critical to follow trusted sources and equally important for clients to consult with their financial advisor on any belief that is influencing their perspective on their financial future.

To counter the pervasiveness of online myths, it’s paramount for financial advisors to guide clients through the maze of information. Over the years, I’ve encountered several investment myths that have gained traction not just on social media but also through word of mouth. While it’s important to identify and dispel these misconceptions, what sets an advisor apart is how you turn misinformation into educational moments.

Three Investment Myths

“Social Security: Claim it early before it’s gone.” – Many believe it’s best to claim Social Security benefits as soon as they’re eligible. However, there are significant repercussions from taking it early. While your neighbor might benefit from claiming early due to their specific circumstances, it might not be the best choice for you, given the potential long-term financial implications.

Decades in retirement

“Pay off all debts before retirement.” – The idea of entering retirement without any debts is undoubtedly appealing, but is it always the best strategy? In periods of high interest rates, this can make sense. However, during times of low interest rates, there can be advantages to maintaining certain low-interest loans. These loans can offer tax benefits and might even serve as a financial cushion, allowing retirees to leverage their investments in more growth-oriented vehicles.

“Minimize investment risk as you age.” – It’s a widely held belief that as we age, we should be more conservative with our investments. While there is merit to this, many of us might spend 30 years or more in retirement. With the rising costs of healthcare and the unpredictable nature of inflation, it’s essential to ensure our portfolios can grow over time, providing a safety net for a long-lasting retirement and unforeseen life events and expenses.

The Power Of Continuing Education

One of the most effective tools in dispelling myths is education. By sharing real-life examples and illustrating the potential outcomes, you can provide a clearer picture for your clients. Through newsletters, social media posts, seminars or webinars, ongoing education can make a difference. It’s not just about debunking myths – it’s also about proactively providing accurate information to clients.

Sometimes a brief conversation and a little advice can go a long way. A client recently told me during a seminar on financial planning that they were ready to turn on their Social Security benefit. The person shared they were okay with being penalized since they were accepting these benefits before age 70. I told them that there was no penalty since they were over the full retirement age.

Navigating Emotions And Information Overload

When it comes to investing and financial planning, an investor’s emotions can be influenced by something they read or watched on social media. Don’t dismiss a client’s beliefs or feelings up front. Instead, understand them. By tapping into the emotional underpinnings of a client’s belief, you can guide them toward well-informed decisions.

Also, in our era of “information overload,” standing out can be a challenge. To overcome this, present unique ideas in innovative ways. It’s not just about advertising a solution – you should showcase the method behind that solution. For instance, I highlight planning strategies that could potentially reduce future tax liabilities. Another example is donor-advised funds, which can have huge tax benefits.

Greg Wells is Regional Director and Partner at EP Wealth Advisors.

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