Meet Robert.
Back in 1997, Robert wrote a book. It turned out to be a very popular book and sold 32 million copies worldwide.
Presumably Robert made a few quid from this endeavour. Well done Robert.
Robert thinks that the world is about to end. The trouble is, Robert always thinks that the world is about to end. Robert has spent the last twenty years saying, in increasingly outlandish ways, that the world was on the brink of an economic collapse.
Robert has been totally and utterly wrong.
Source: X.com - the brilliant Nick Maggiulli, @dollarsanddata. Data is the S&P 500 index, in USD terms.
Turns out that the greatest companies in the world couldn’t care less what Robert thought. They kept growing their earnings, and making money for shareholders.
Robert knows how they do this, because Robert flogs his books on Amazon.
If all of this doesn't feel very Christmassy, that’s because it isn’t I’m afraid.
But I do think that this sort of behaviour needs to be called out for a couple of reasons.
First off, Robert is influential. He has 2.4m followers on Twitter.
Despite costing a lot of people a lot of money over the years he maintains a sizeable audience, and a significant platform. The bloke’s been on Oprah.
This is the sort of person that Joe Public associates with financial literacy. I have had clients in the past mention that they are worried because of what they have seen this guy write. Actions have real-life consequences, and he has a responsibility.
Second, Robert has been wrong for a very long time - and as far as I can tell has shown little to no contrition. Moral decency aside, from a purely intellectual standpoint at some stage you have to critically assess your own thinking. What am I missing? There is no evidence of this kind of self reflection.
Finally, and most damningly, Robert must be an intelligent man. He has been successful and made himself (one presumes) a wealthy man in the process.
But, economic and stock market history shows us that the sort of cataclysmic crashes that Robert predicts over and over again on Twitter are just extremely low probability events. He must surely know this.
Have another look at the chart above. Going into 2020, I doubt even Robert could have come up with a scenario that saw the global economy put on standby mode for eighteen months, unemployment skyrocket to the highest levels since the Great Depression and most of the world forced to stay locked down in their homes for months on end.
However, that’s exactly what happened and the S&P was making new highs by the end of the year.
So if Robert knows that these predictions are just really, really unlikely to play out - why do you think he keeps coming out with them?
Robert makes money by selling books, investment newsletters and coaching courses. He is in the business of gathering eyeballs, not in the business or providing regulated financial planning. While the advice from a regulated and sensible financial planner is often to “do nothing”, Robert wants you to always be “doing something” i.e. engaging with his content.
You will draw your own conclusions as to whether Robert actually believes any of what he says. I suspect you know what I think.
Everyone is selling something. There isn’t anything wrong with that at all, that is the nature of the capitalist society that we live in.
But financial services is somewhat uniquely placed in that it can be unclear on how the person you are dealing with is actually incentivised. You aren’t walking into a shop to buy a pint of milk.
Conflicts of interest will exist to varying degrees within any services business. I have my own views about how conflicts between a financial adviser and their client can be minimised - maybe we’ll even discuss it one day over a coffee. But I don’t think that they can ever be fully eradicated. Everyone is always selling something, even if it’s just their own services.
It is just really important that these conflicts are identified, and brought out into the open so that the consumer can make the right choice for them.
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