Do you, a friend, or a family member, find yourself instinctively adjusting your portfolio or approaching your finances in a certain indescribable way? Do you often have great difficulty listening to new financial philosophies, or even become aggressively defensive of a particular strategy that you have held to for months or even several years? If any of these actions sound familiar or describe your situation, you might have just found yourself in a financial cult.
What is a Financial Cult?
Financial cults appear in all forms. Essentially a financial cult is a very specific or specialized philosophy on how to invest or manage one’s money. On the surface, some financial cults can even have a very positive message such as protecting your future or approaching debt in a sensible manner. However, when taken to an extreme, a financial cult can also be financially destructive as there is often no flexibility from the doctrine and it becomes dogmatic.
What are some examples of financial cults?
This blog is not aiming to demean or strike at specific companies. Rather, I feel it is important to note certain themes, biases, and the overall tunnel vision that we see in the marketplace for financial ideas.
Some of the key tells that help you to identify financial cults are when the “experts” tell you:
These are just a few examples of what firms with cult-like followings might say. The common thread is that they all lack flexibility or deviation from their own “secret sauce” strategy and this can result in a superiority complex where they are unable to challenge their own beliefs. So while the philosophies and advice presented are not intentionally meant to harm the public, they lack the customization and nuance to help every individual the way they ought to be helped.
There is nothing inherently wrong with utilizing an index-based portfolio. Nor is there anything wrong about building a portfolio with an active strategy in place, leaning toward one asset class over another, or investment vehicle that you are more familiar with as this could create opportunities. Out-of-control debt is a problem, but debt can also be a utility for building additional wealth. Life insurance sold by reputable agents is not a scam and can be utilized beyond just the future death benefit, but is not an all-in-one solution. The fact is that financial advice must be challenged, and there is often more than one solution.
How Do You Escape?
Unlike a real cult, if you are comfortable with, and fully understand the biases of the financial firm that you are working with, there may not even be a need to escape. It is important to fully understand both the potential rewards and the risks that come with any financial strategies that require an extreme level of devotion or buy-in to their philosophies. Most firms are not out there to pull the wool over your eyes, but investment firms, just like people have cognitive biases.
Before choosing a firm, and more specifically a planner, I would encourage you to download My Financial Coach’s guide: “7 Things to Know Before Hiring a Financial Planner.” At My Financial Coach, we acknowledge that clients come from all walks of life, and carry with them their own financial biases developed through time and from personal experience.
Home Again
Our Financial Coaches embrace the use of different strategies and strive to provide a balanced and unbiased approach to comprehensive financial planning. That is why we do not sell any specific financial products or services but rather we model out a personalized financial roadmap to get you to your destination and also highlight the many streets and backroads that you can take to get there.
Best,
Andrew J. Crosby, CFP®, ChFC®, RICP®
Lead Financial Coach
Photo #1 by Alex Azabache on Unsplash
Photo #2 by Drew Coffman on Unsplash
