When annuity marketing material needs a little embellishment, that can be a big problem in court.
By Linda Koco
Financial prognosticators have really been busy recently, and what they are doing may be muddying the waters for consumers. Advisors could come to the rescue.
Here is the issue. Financial gurus are finding it important to weigh in on whether the Dow hitting 14,000 and the Baltimore Ravens winning the 2013 Super Bowl are bellwethers for the markets (and ergo, the economy) for the next 12 months.
The commentaries are fun to read but they can be confusing for consumers to evaluate.
The Dow at 14,000
Just hours after the Dow hit and surpassed 14,000 on Feb.1, for example, these prognosticators began opining on how close the Dow is to its all-time high of 14,164 in October 2007.
The cautiously optimistic among them declared the development a sign that market recovery is here and will likely continue. Meanwhile, the dismissive ones pointed out that the Dow did not surpass the all-time high and that the economy is not really on a tear, given all the financial problems that remain to be solved.
The two sides of the coin were there for all to see. The problem is, consumers don’t always have the skills needed to weigh and filter the divergent views. Is the coming year going to be up or down? Is this the time to take action in financial areas that have been on hold or not?
Those questions are reminiscent of the now-common medical question -- will sunshine give me Vitamin D or skin cancer?
One can always hope that consumers who feel confused (or interested) will contact their advisors for some rock solid guidance.
But whoa, there. How many consumers will do that? And how many advisors are prepared to talk about Dow 14,000 as a predictor or reason for action one way or another? After all, there is a whole lot more for them to talk about with a client than the level of the Dow—the client’s goals, objectives, circumstances, and risk tolerance being right at the top of the list.
Then there is the matter of advisor licensure. If an optimistic-oriented advisor is licensed only in insurance, how can the advisor respond appropriately to Dow-ish confusion without crossing into speaking about securities? Similarly, if a dismissive-oriented advisor is licensed only in securities, how can the advisor confidently redirect the conversation to discussions of safe-money solutions such as certain types of insurance and annuity products?
Experienced advisors will have no problems making those transitions. The licensure issue bears mention all the same, given the nervousness of regulators about how these matters are handled.
The Super Bowl winner
Oh, but wait a minute. Maybe all the savvy advisor needs to do is to consult the Super Bowl Indicator (SBI).
According to a press release sent out by Toronto’s BMO Financial Group, the SBI has been regarded as a way to predict a bear or bull market. Again according to BMO, the prediction is based on which team wins the Super Bowl — i.e., when the team representing the National Football Conference (NFC) wins, the market goes up, but when American Football Conference (AFC) franchise wins, the market goes down.
Based on movements in the S&P 500 Index, the Super Bowl indicator has been correct just under 80 percent of the time, the BMO statement says. In fact, the release quotes Jack Ablin, the chief investment officer of BMO Harris Private Bank, as saying that the New York Giants won the Super Bowl in 2012 — the same year that the S&P gained 13 percent.
Well, OK, then! Let’s just go with that. Since the Baltimore Ravens won the 2013 Super Bowl, and since the Ravens are a team in the AFC, 2013 will probably be a bear market, right? If so, planning-minded clients and advisors can put the Dow aside and just look at football scores, right? And then…
And then … put frivolity aside. Insurance and financial planning and advice is serious business. Depending on particular circumstances, it can be a complex business too. This is not a playground where instant predictions based on the Dow or winners of ball games should direct insurance and financial planning and decisions.
Still, when instantaneous predictions do make headlines, it can be a good time for advisors to help filter out the noise and focus on the client’s own needs and circumstances. And that is a good way to demonstrate the advantage of having an experienced and trusted financial advisor in one’s hip pocket.
Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at firstname.lastname@example.org.
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