“… I know it when I see it…”
Justice Potter Stewart, 1964
The quote above was made by Supreme Court Justice Potter Stewart as part of his attempt to define what constitutes obscene material. While clearly he was speaking of a subject not related to financial planning, we believe the statement also applies to what we call “financial pornography.”
“Financial pornography” is a statement, advertisement, or article
regarding any specific class or type of financial product that is
primarily intended to incite only an immediate, intense emotional
reaction, typically omitting any substantive discussion of the pros
and cons of the subject matter, and more often than not focusing
only upon the disadvantages of that which is “disliked” and only
upon the advantages of that which is “favored”. In other words, it is
shouts of n extreme, unbalanced view of the subject matter. This is
difficult to precisely define, but we “know it when we see it” and we
suspect that you do too.
Financial pornography is not restricted to any particular sector of
financial services, it spans the spectrum of the profession; we see it
everywhere and it can be “positive pornography” or “negative
pornography”. Examples of “positive” financial pornography might
be statements such as “Get market gains without market losses!” or
“Only stocks can provide the growth needed to provide for a secure
retirement.” There are grains of truth in both of these statements,
but both also omit some very key and very important details.
Examples of “negative financial pornography” might be “Stocks and
securities are too risky” and “Annuities are expensive and
unnecessary”; again, neither statement is true, as both omit multiple
important details and objectivity. In both cases the statements are
intended to elicit an emotional reaction, or perhaps overreaction, on
Financial pornography is not always consciously intentional on the
part of the author, in many cases it may simply reflect the authors’
limited knowledge, or in more extreme cases, may reflect who signs
the authors’ paycheck.
Promotion of the merits of a particular class of financial product or strategy is not financial pornography so long as it does not exaggerate the benefits of the “favored’ and the disadvantages of the “disliked.”
There are many classes of financial products, and within each class, typically a multitude of options to choose from, each with their pros and cons and suitability as regards specific goals. There is no perfect investment or insurance product, no perfect planning technique, and above all, there is no “one size fits all” when it comes to financial matters. All of these options must be tailored to the specific needs, goals, and temperament of the individual or couple; this is particularly true as it relates to retirement income planning.