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How Bias In Fiancial Advice Can Hurt You

Bias is sneaky. Most of us don’t even know it’s there. The advice we get from our broker, our planner, or our favorite website seems logical, straightforward, and honest. But, lurking just beneath the surface of the well-crafted copy (words organized to convey a point of view) lies a silent killer of performance… bias.

It can take many forms. It can be a hidden agenda. It can be a conflict of interest. Or it can simply be an argument based on a false premise. Whatever the nature of bias, the impact is the same – it leads you to make investing decisions that could end up costing you a ton of money.

Today I’ll focus on one of the most common forms of bias out there. The asset-gathering bias. Brokers, advisors, and planners are all in the business of gathering assets. Fees are based on assets, so these folks all want to capture as many accounts as possible, and bigger accounts are always better. There’s nothing sinister or evil about this fact of life. People need to get paid. But when it comes to your money, this bias is more than dangerous. It’s a killer.

Has your broker/advisor/planner ever called you up and told you to sell everything and go to cash? I didn’t think so. That would be career suicide for a financial professional. They don’t want to scare their clients, they want to calm them. So most professionals do a lot of ‘hand-holding’ when things get dicey in the market. But is this really in your best interest?

Here’s the shameless plug for a skilled investing coach. I have nothing to gain by keeping my clients invested in the market. If I think that the odds favor a big market drop, I’ll tell my clients. If they move to cash, it doesn’t affect how much money I make. But it reinforces their faith in my commitment to always tell it like I see it.

I’ve been coaching for more than 30 years, and my clients expect me to tell them the truth, even if it’s scary. Since I always do that, and I never pull punches, my clients are fiercely loyal to me. By simply avoiding the stock market when a major recession is coming, my clients make about 4% more per year in returns on their portfolios. That means average annual returns of 13% to 14% for the majority of my clients. It’s no wonder they’re a happy lot.

For details about how to become a client, check out my website at http://www.zeninvestor.org.

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