The Dangers of Relying on the Media for Financial Advice
If you’re a regular reader of Creative Planning’s articles, you’re likely aware of the importance we place on serving as a fiduciary to clients. Operating as a fiduciary means we’re legally required to put clients’ needs first. Any recommendations we make must adhere to a duty of care and a duty of loyalty.
- Duty of care – This duty includes not only providing advice that’s in the client’s best interest but also executing that advice in the best way possible for the client. The duty of care standard also requires that we provide ongoing advice and guidance throughout the life of our relationship with the client.
- Duty of loyalty – This duty requires that we put our clients’ interests ahead of our own. It further obligates us to provide clients with full and fair disclosure of all material facts relating to the advisory relationship. Furthermore, we must seek to eradicate, or make the client aware of, all conflicts of interest.
Mainstream media also has a fiduciary responsibility, but it’s not to the consumers of its content. Instead, media personnel are typically required to act in the best interests of the organization they serve. That means they’re expected to execute reasonable decision-making and avoid placing the organization at unnecessary risk.
It doesn’t mean the media is responsible for providing information that’s in your best interests.
In today’s day and age, the 24-hour news cycle means media outlets often serve as key influencers in shaping public opinion, and many people’s behavior is heavily influenced by the news they consume. However, media organizations are largely unregulated when it comes to the information they report. That means there’s no way for the public to ensure they aren’t prioritizing their own interests over the best interests of their consumers.
As a result, it can be difficult to know if the news you’re consuming is biased or skewed to support a specific point of view that may or may not be in your best interests. You’ve likely experienced skewed reporting among certain news outlets that favor one political point of view over another, but you may not realize that biases also occur in financial reporting.
What’s to keep a media outlet from manipulating information to favor a specific Wall Street firm or investment strategy? As scary as it may sound, the answer is absolutely nothing.
What does this mean for investors?
It means it’s important for investors to be media savvy and avoid making emotionally driven investment decisions based on market noise. Making short-term investment moves out of fear rarely pays off in the long run and more often leads to the unintended consequence of selling low and buying high, which can drastically reduce your returns over time.
Your long-term investment strategy should be informed by a wide range of data. Current market events play a role, but they’re not nearly as important as maintaining a diversified investment strategy that’s informed by your long-term goals, risk tolerance, current financial situation, investment time horizon, etc.
The best way to avoid making emotionally driven investment decisions based on misleading media coverage is by having a financial plan in place. A fiduciary wealth manager can help you create a detailed plan to guide your financial decision-making based on your specific needs and goals. Although your wealth manager may recommend small tweaks to take advantage of certain market conditions, your investment plan should be designed to help guide your long-term strategy and weather short-term volatility.
Could you use some help establishing a long-term financial plan to guide your decision-making? Creative Planning is here for you. Our experienced teams help clients filter out irrelevant market noise and make smart decisions in line with their personal financial goals. For help with your long-term financial strategy, please schedule a call.
For more of my financial insights, check out my new book: Money, Simplified.
