Beware of the 'financial community'.
However, I consider myself a professional in financial business. My regulatory licenses are valid across three continents to trade and advise clients for equities, bonds, commodity futures and insurance products. I have professional training and certification in financial, estate and tax planning.
I say without any hesitation that the greatest risk to your wealth and financial health comes directly from the industry that most people depend upon for financial help.
Every industry carries potential harm to the people. We expect the government, through laws and regulations, to protect us from the dangerous practices that 'big business' can sometimes do. Drugs are tested before being released. Automobiles and airplanes-usually-are subject to various standards of performance and safety. Heath inspectors are supposed to monitor conditions in the kitchens of five-star restaurants and the local fast-food joints.
But when it comes to the financial services industry, you are on your own. In this field, the regulatory agencies are like the police whose presence is a deterrence to crime. But they only kick into action after you have become a victim. It is like the bus driver who is licensed and occasionally tested but who is only arrested after driving under the influence of alcohol or drugs, or when he gets involved in an accident.
Straight upfront let me say that you have to work at not being taken advantage of, let alone not being cheated in Ponzi scams. At least with the more blatant scams you can usually avoid disaster with the time-tested question: 'Is this too good to be true?'
More sinister is the deceptive advertising that often use ideas that seem valid. Popular now is the 'false equivalence' argument found in this example. 'P10,000 spent in 2007 on a phone, invested in a Time Deposit, Mutual fund and Jollibee shares would now be worth P13,043, P22,308 or P55,600.'
How about this response: 'I used my P10,000 cell phone to make an appointment with a client who bought a condominium that earned me a P200,000 commission.' That example being used by the 'financial gurus' is no less absurd than this-'You've been spending on a life insurance policy for 20 years. What a waste. You didn't die, did you? Instead you could have had one Friday night a month at the bar of your choice with drink, food and 'companionship.' I told you I used to own a bar.'
A cell phone is a tool. A Time Deposit is where you store excess cash. A Mutual Fund is a long-term savings vehicle. Jollibee shares are an investment in the stock market. False equivalence argument debunked.
The stock brokerage community is not without its illogical arguments to get your money, including the 'Fallacy of Sunk Costs.' That is why they recommend holding a stock even when it is going down 'because you are already invested, so why take a loss? Better to buy more as it goes down.' Another is a variation of the tu quoque-Latin for 'you too.' 'I made a million last year and I can show you how to do that this year.'
Everyone is entitled to being taken advantage of but remember this: The Italians have an old proverb-'He that deceives me once, it's his fault; but if twice, it's my fault.'