‘Puffery’ Can Blow Away Your Retirement Goals

The Goldman Sachs Tower. New Jersey
The Goldman Sachs Tower. New Jersey (Photo credit: luismontanez)

Wall Street bullies are everywhere. Since people are constantly on the look for a prediction of the future because of course no one like uncertainty. The Wall Street bullies are constantly supplying predictions and ignoring the fact that these predictions are very seldom correct. Investors would be much better off developing a prudent investment strategy and remain disciplined to that strategy.

Judge Crotty characterized Goldman’s legal position as “Orwellian.” In a particularly scathing note, he observed “[I]f Goldman’s claim of “honesty” and “integrity” are simply puffery, the world of finance may be in more trouble than we recognize.”That is precisely the issue.

Investors need to understand they are in “more trouble” than they realize. Many brokers and advisors show little constraint in making statements they cannot possibly support. The daily grist of these “financial experts” is that they can help you secure your retirement by finding fund managers with investment skill who can “beat the markets.” They don’t disclose the compelling, peer-reviewed data indicating that evidence of this “skill” is exceedingly rare. In those few who appear to have it, after management fees and trading costs, even they are unlikely to beat their benchmark. The nail in the coffin is that this elusive skill does not persist, and relatively few top performing fund managers are able to repeat their outperformance in the following year, much less over the long term.

The Wall Street bullies do not have their customers interest as their top priority. Investors need to recognize that these firms have gnerating fees as their top priority.

Please comment or call to discuss how this affects you and your investment portfolio.

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