As someone who is educated in Finance at the University level and with nearly 8 years experience investing across many asset classes (stocks, bonds, private real estate, public real estate, cryptocurrencies, currencies, commodities, options, private businesses etc.); I see a lot of horribly misleading and predatory content out there regarding personal finance & investing.
Ultimately you should ask yourself if these people have the experience or knowledge to teach others.
(No posing in front of a rented Lambo doesn’t count!).
On Trading/Investing “Pros” AKA Scammers
They are the main thing to watch out for since their whole goal is to scam you. It's much better to invest in a stock & lose 20% while learning for yourself, than to give someone thousands of dollars for a “course” they are certainly not qualified to teach.
Coffeezilla on YouTube Breaks Down Some Funny Ones:
Common Patterns:
- Aggressive ads showing off expensive cars, luxury goods or mansions. (These can easily be rented for the ads/videos)
- Promising to “teach” you how to “day trade”, often showing large daily gains and positive charts. (These can easily be photoshopped, edited, or simply taken after the fact by searching which stocks went up most at the end of the day)
- Claim that starting off with small amounts of money is all you need to quickly “get rich on the stock market”, if only you follow them and sign up for their courses. Ads will often show “I started with $500 now I have $3 million!” or something along those lines. (It’s a powerful hook, don’t take the bait!)
- At the end of the day all they are selling is expensive “stock/day trading” courses, and they need new comers to stay afloat!
Here is the undeniable fact: If someone developed a trading strategy that guaranteed the types of returns these people often promote (1% per day, 10% per day etc.), the LAST thing in the world that they would do is TELL ANYONE. Instead, they would raise as much money as they could and in a few years they would be among the richest people on planet earth. This is because the more people know about a good investment, the more they invest in it, until the opportunity disappears.
On Self Help Styled, Semi-Celebrity Gurus
They usually offer books, one-to-many coaching sessions, events and online based memberships some of which are very expensive. From what I’ve seen the majority cover only the basics of budgeting/planning/savings and usually offer overly simplistic advise when it comes to investing (for instance prioritizing debt repayment above investing/saving regardless of interest rates).
While buying a little book for $20 might be harmless, many of these types of people are constantly marketing new products. There is always another “seminar”, event, or network to join. Beware of over spending or getting too involved in their programs as once the fever wears off you’ll find that you spent hundreds (maybe thousands) of dollars to learn just a few basic points in many different ways. Your time and money would likely be better spent on learning employable skills or simply saving and investing it for your own future.
Good signs: If the person has a credible background in investing or general success in business and they only released a main book/resource while all their other content is free; then its more likely to be a good resource.
On Advisors and Agents
“Financial Advisors” such as Financial Planners, Banking advisors, Insurance brokers, Mortgage brokers and Real Estate Agents are the most widely used service providers for individual help with financial issues. They provide personalized retirement planning, investments, insurance, real estate, tax planning and estate planning. These people can be extremely helpful especially as your wealth grows and your needs become more complex. Most advisors are good, but there are several things you should know!
Those with a fiduciary duty, are required to serve your best interest. Typically, Certified Financial Planners (CFPs), Real Estate Agents and some independent Financial Advisors are fiduciaries. They are required by law to provide you with the best solutions for your needs. If you feel that they have not done so you can sue them. Additionally, it is common for these to be “higher up” within their profession having received more education and having more experience, this will also help you achieve better long term results.
Issues arise when dealing with non-fiduciaries, as they have no responsibility to you but instead are focused on maximizing their own fees or their firms’ sales. Usually, “Financial/Insurance/Investment Advisors” at most banks/insurance companies are the front end sales people for their investment or insurance products. They have sales quotas and are paid on commission. Their incentives are to get you to invest or use the highest fee products, regardless of whether it's in your best interest or not.
If you are unsure if they have a fiduciary duty, simply ask them. Ideally, you’d want most of your issues handled with a fiduciary. But if you are just starting out and you want to learn more about various products they offer the “advisors” will be a useful place to start and could still provide good information. Its just important to keep in mind their incentives when making your final decisions.