In today’s modern media world of Facebook and Twitter, we’ve all witnessed “outrage marketing”, even if we don’t know the term. These are the articles designed to elicit an emotional response, either positive or negative. In this month’s episode, Dave and Steve discuss “outrage marketing” in the world of personal finance. How can this type of marketing bias your portfolio and how you invest?
All right. Welcome to Plan for Life Now, episode number 84. And we are in mid-October here. Dave, how are you doing today?
Dave:
I’m doing pretty well. How do I sound? I’m in the sunroom of my house. I usually don’t record here. Is it okay?
Steve:
Sound good. What do you usually use, like the shower or something for the acoustics?
Dave:
No, I usually use my office, but my wife is using the office for something else. So now I’m in the sunroom. The sun rooom’s good. If it sounds good…
Steve:
Sounds fine.
Dave:
Nice, private place. I can look at my backyard. Maybe I’ll do more recordings in the sunroom, but that’s not why you’re listening, everybody.
Steve:
Well, might be. They like that stuff better than all the financial stuff. That’s boring. Well, I was going to apologize and it might start up again. My daughter is doing PE upstairs and she is unfortunately back in virtual school for a few days.
Steve:
They had a positive COVID test in their class. So she’s got to quarantine, but it’s a little bit noisy with PE going on up above my head. But…
Dave:
It is so sad that your daughter’s doing PE at home.
Steve:
I know.
Dave:
Everybody listening is thinking the same thing. It’s like, what is going on with…
Steve:
So ridiculous.
Dave:
My kids are out of the house, but I feel bad for Steve and his kids. Okay, I just said it for everybody.
Steve:
All right. But that is definitely not the reason why we’re here talking or you’re here listening today. So what we wanted to talk about today… I think this is really a great topic and so much more than we’ll be able to cover just in this podcast here today. And talk about the way that the internet, and social media, and all of this has affected, or changed, or influenced our jobs and working with clients and financial planning.
Steve:
And we’ve all seen all the discussions out there and all the articles and breakdowns about the way that… I’ll pick on Facebook in particular, but obviously is across Twitter, and Instagram, and all these different platforms. But the way that that has influenced politics and made many aspects of politics, more partisan, more emotional… You guys know what I’m talking about.
Dave:
Right.
Steve:
And that’s certainly trickled down into our industry. So Dave, you brought this topic up saying let’s touch on this, how this has impacted us and the clients that we work with.
Dave:
Right. So I think first of all, when you look at the impact of social media now it’s… And what sparked this in me was watching some of the, or reading, the news about the hearings and all this stuff in Congress about this. But really to me, first of all, it’s things that were already there are made worse, let’s start with that.
Dave:
And I think that’s how it applies more. So in other words, partisanship was already there of course. Being on social media and only getting your news from social media makes it worse. Body shame. You could go through a million things that they talk about on this. Body shaming was always there. This makes it worse. Things like that. So a lot of these things were already there. And I think we should always say that anything, when we talk about the internet and social media, there’s always there are positive things about this that make it. It’s not all negative, but there are these negatives that have… Basically there’s a megaphone for everything. And when everything is wrong or unfactual, it still has a megaphone that makes it somehow true or perceived to be true for people who aren’t in the field.
Dave:
That’s how we start to get to where we are.
Steve:
Well…
Dave:
So, you do go ahead with your first thought or I’ll just go with mine…
Steve:
Well, what I was going to start off with was what you were starting to touch on there, is believe me, there are many, many positives to easy access to information. And now I’m just talking about in the financial realm of things, but there are many, many positives to, nowadays, if you want to learn about what’s a mutual fund? What’s an ETF? What are call options? What are all of these things? You can Google it and you can get information about all these things. You want to Google your advisor. I mean, think about how much easier that is now, or how possible it is now, to Google your advisors.
Steve:
See if there’s been complaints against them, things like that. This 30 or 40 years ago, or frankly, even 20 years ago, just weren’t possible. So I mean, those aspects of the information age are absolutely positive. But you quickly get into some of the negatives as well.
Dave:
Right? And I’ll start with a negative.
Steve:
Okay.
Dave:
Because it’s always been… It’s one of my biggest pet peeves. I don’t really get frustrated by too many things anymore, after more than two decades in this business. But I don’t like when anyone uses social media… I have no problem with people using it for marketing. I don’t like it when they’ll use it in that megaphone way of throwing something out there for the purpose of marketing that could then harm other people who look at it and don’t apply it to their situation. And the number one thing that always comes to my mind is the polarization of annuity.
Steve:
Yeah.
Dave:
Annuities are either bad…
Steve:
Right.
Dave:
Horrible. Annuities are bad has been somebody’s campaign, not just something thrown out there. Or on the flip side, there’s wow, they’re a product that you could sell basically saying all upside, no downside. In other words, they’re fantastic. And to me, that’s the number one thing that comes to mind. And we’ve seen both sides of the negativity of that. And maybe we’ll talk a little bit about how we would use annuities, but on the side of annuities are the greatest thing of all time, a lot of times what’s never spoken is the fine print. And a big [crosstalk 00:07:37] in fine print means fees, in some cases. And fine print also means that you’re locked into these products. There’s a penalty for getting out of them. And when people put so much of their retirement money or liquid money… Money that they need might need immediately… Into a product that looked like it was all upside and no downside.
Dave:
And then all of a sudden when they want it, they have to have pull it out for whatever reason, and there’s a big penalty. Now you’ve seen the downside of the wow, all gain, all protection, no downside thing that’s out there. For part, for some, for the pro selling annuity crap. But the flip side is just as bad and more nuanced. And that is that these products are bad because their fees are high. In other words, I’ll use what’s wrong with them and flip the argument. There could be really high fees and you can’t get out of it. And you’re locked in and this and that. And just saying, for whatever reason, that these are bad. And the reality is there’s a place for annuities [inaudible 00:08:49] Quite frankly, we’ve used them in our practice for people where they fit, and they fit in a lot of ways.
Dave:
They fit in what they are and being able. If you don’t have to touch some money for a long period of time, and you’re looking for a reasonable return and you’ve seen the current returns in your savings account. Hey, there’s a place for annuities. And certainly when, if you need to create retirement income out of your assets, i.e. you’re somebody who is used to living on $150,000 a year. And now you see social security is going to be paying you 40 and you have to make up some income every month that you can count on out of your assets. There’s another example where that could be a place for annuities. And to just say no, and then be in a position that I could have done that because of something I’ve seen on social media of that polarization. That one would be my number one personal issue with it.
Steve:
Well, yeah. I mean, it, I didn’t need a crystal ball, to guess that you were going to go there and that we were going to talk about that…
Dave:
I know because I always talk to you about like, if we’re not the thing [crosstalk 00:10:01].
Steve:
But that’s a classic example. As I was kind of doing a little bit of research and planning for this talk here of what they call outrage marketing. And outrage marketing is this idea that you put out there some sort of very polarizing type of statement, and that’s going to either really excite people or really outrage them. But that’s much better than putting something out there that says annuities might or might not fit your situation. And it could potentially be good for you, but also might not be. That’s not going to drive anybody. Nobody’s going to be interested in that.
Steve:
And I was looking at some of these examples in my Google search here of outrage marketing. And one of them was an article that was written in the summer of 2020 by one of the New York City papers at the time, but I don’t know if it was the Post or something else. And basically declared that New York City is dead. It said New York City is dead. Nobody’s coming back to New York City. Now, remember this is summer of 2020. We’ve gone through all the COVID stuff. Everybody’s working from home. Everybody wants to move to a bigger house, out farther than the suburbs, cause they don’t have to commute anymore. So this general idea that maybe cities will transform and change in some way. It’s kind of out there. But moderating your opinion and having sort of things might change. That’s not going to drive page clicks.
Steve:
That’s not going to drive people to your site. So apparently this author wrote this article that he did not believe that New York City was really dead. But he wrote this. And of course, people like Jerry Seinfeld come out and write rebuttals to it. And they’re all… it generates interest. And then in the financial world of things, I read one… Dave, have you ever seen this? Apparently this one comes up on CNBC every six months or so where they break down a budget of somebody making $400,000 a year, and they show basically how they’re just breaking even earning 400,000.
Dave:
Yeah. I have seen the… I always look at that because I find it interesting, which is what they’re looking for.
Steve:
Exactly. And I mean, they break this down and they show, okay, this person earns 400,000, which I think we’d all agree is a pretty good income.
Steve:
I mean, it’s not ultra wealthy, but it’s pretty solid. And they break it down. They say, okay, this person lives in New York City. They’ve got two kids in daycare. They’ve got to pay property taxes. They’ve got a property worth 1.6 million. So they’ve got a mortgage of blah, blah, blah. And they save into their 401k and they save in their 529 plans. And at the end of the day, they have nothing left over. Right? And of course this… Another example of outrage marketing. People get super angry and go, how could you possibly not live on 400,000? What is wrong with you people? But that’s, unfortunately, the world that we live in is these divisive things are so much more powerful than just being somewhere in the middle balanced approach. And I wish I had something more profound to say. Okay, here’s the solution, here’s how to make it better.
Steve:
Here’s… I just don’t know. How do you get that balance and not get sucked into the…
Dave:
The financial? Well, understanding what the motivation is, which we just talked about is a good start. It’s a good start. But ultimately where the danger lies is when it comes to dealing with yourself, your own, or you and your family, and your own finances, and your own retirement planning. At this point, you A. This is why, I mean, I guess this is why we’re in this business, but I would always say the virtually, everybody who would be listening to a podcast like this, whether it’s us or someone else, it really helps to have a trusted well-balanced advisor or advisory group. And well-balanced means not biased. Not prying into the bias that we just discussed for whatever reason.
Dave:
And I guess what that means is you, to an advisor, you are a blank slate when the advisor meets you for the first time. You find that information about you, and then you apply your professional expertise to achieve what we’re trying to achieve. A lot of times it’s just having enough money. What’s the most money I could live on per month? Be comfortable, not worry, have as much peace of mind as possible in this world? How do I achieve that? And then you work your way down that funnel to the specific recommendations. And everybody is different. So no matter what you’ve heard out there… And you could go through every single thing that we deal with, and there’s going to be some polarization. I heard that the S&P 500 is where I should put all my money.
Dave:
I heard that long-term care insurance is bad or too expensive. Or, no matter what, I need long-term care insurance. Or, no matter what, I should have… And this is… I should not have any individual stocks because they’re bad. Or all, I should just be selecting stocks. And… So it’s the all or nothing. The all or nothing thing is very dangerous. How do we avoid that? And that’s by looking. Everybody needs to look at their own situation. And then our business is so complicated and there’s so many things to look at that I almost say the advisor has to take… You’re a blank slate and now what do we know from our expertise, our toolbox, as you always say, how do we apply that without bias?
Steve:
Yeah. And I mean, as you were talking there, I was thinking about kind of the crossover of the number one polarizing thing out there, politics, and how that can, for some people, bleed into their financial recommendations or financial actions.
Steve:
And I know I’ve told these stories before about the one client who, the day that Obama was inaugurated, said he was going to sell, and he did, sell all of his stocks, missed out on that whole run. And then the clients that called us the day that Trump was elected and said, I’m getting all out of stocks. Both of those would have been dead wrong to do. And in some cases we talked them out of it, in some cases we didn’t. But that’s letting that polarization on the political realm of things dictate your actions on the financial side of things. And that’s kind of all bleeding together there. But that gets to be dangerous as well.
Dave:
Yeah. Do you agree with me as we talk about this, I think we’re so unemotional about all that stuff at this stage of the game that you and I don’t even think about it too much.
Dave:
It’s almost like… I always look at… This is not a good analogy because what we do doesn’t compare, this is life or death, but a surgeon, like a brain surgeon. There’s a lot of noise, a lot of emotions. There’s a lot of whatever their patient is thinking before they go under. But ultimately the surgeon sees what they see. It’s very factual, for the most part. There’s some subjectivity, but you’ve seen it before and they go about their business. In my opinion, the best probably almost as if they’re changing the oil at Jiffy Lube. We’ve done it so many times and they’re not very emotional. And we’re not very, I mean, you and I hear this stuff all the time about everything, but you and I are not very emotional about the work we do at this point.
Dave:
We know what to do. And we explain it. Our job has always been more like a teacher with clients because… And I think that’s not just our job, I think that’s every professional’s job who’s working with customers or clients or whatever. You’re teaching them what you know and trying to explain it the best way so they understand why you’re making a recommendation.
Steve:
I think you hit the nail on the head there. I’ve always felt that teaching and educating was kind of fundamental and core to what we do because those people who say, well, I don’t understand a single word you’re saying. I’m just going to do whatever you say, but I don’t understand anything. Oh, man, that makes me uncomfortable because it’s not a static situation. Things are going to change. Things will happen. And if you truly have no understanding, your chances of sticking with the plan and following it through are not so good.
Steve:
So educating people to an extent. Not everybody’s going to want to get down there in the weeds and understand every little detail, but educating people, to an extent, I think is really crucial for that.
Dave:
Yeah. Good point. Not everybody, nor should they. I mean, honestly, in my real life, I don’t want to hear every detail about why my guy who pulls down trees in my backyard, and we have a lot, so I know the guy and I trust him. He tells me. They always tell me why, but they’ve also told me, just like we have, you don’t have to pull that tree down. You don’t have to sell that investment. You don’t have to… Because here’s why. And I guess it’s like every profession, some people don’t want to hear all the details.
Dave:
I always get an explanation. Like when my car is getting fixed and I trust the guys who do it, and they tell me why. Do I start to glaze over after a while? Honestly, yes. But they’re telling me why, and they’re explaining it to a lay person, and I get it and I make a decision. But yeah. I guess it’s up to you, if you’re a potential client or you’re dealing with a financial advisor. You also have to let the polarization or things you might’ve thought of out the window. Doesn’t hurt to ask. Hey, I heard… And we’ve had plenty of people we’ve met. I heard… I’ll go back to my annuity. Hey, you’re recommending, I put some money into an annuity. I heard that they’re this, that, and the other thing. I hope and want people to ask those questions.
Steve:
Right. Yeah. I don’t think anybody would, but I certainly shouldn’t take this for, oh, I shouldn’t Google or research any of this. No, you should. But you’ve got to use that as part of the learning process, not the whole process. You’re right. We get a lot of people who will say, hey, I read this. Is this true?
Dave:
And good advisors should be able to say, as good advisors telling the truth, should be able to say, yeah, here’s how that part works with what you’re questioning. Here’s how this part works with what we’re recommending. Here’s why we’re recommending it. Here’s the positives of it. And here’s why we chose this one, or this investment, or insurance product, or whatever. And here’s why we’re doing… We should be able to give specific…. And quite frankly, you relish the hard questions from a client. That means they’re paying attention.
Dave:
When you answer those questions, they should feel better that this is… I was worried about that. I didn’t hold it in. We never want anyone holding it in or holding your questions. You ask it and then you… This is why we’re doing something.
Steve:
All right, let’s leave it there. Unfortunately, we did not solve the future of the internet and Facebook and all that. But I think we touched on the important facts of our industry.
Dave:
This is not about solving. This is more. In that analogy that would be more like the elbow pad I put on before I play basketball for my tennis elbow. I don’t think it’s going to be solved at pushing 60 years old, but at least it’s manageable.
