Picture a scene where two relationship managers for financial advisors are presenting.
The first (and honest) one says “I have no idea whats going on in the economy or markets”
And the second presenter comes on and says “I know exactly whats going on”.
Who do you think is going to win to win the business?
Of course the sales guy who tells the customer what he wants to hear is successful as he is happy to tell the 'porky pies'.
Here is an excerpt from recent writing by Vern Gowdie
Among the recent communication from The Future Fund was a comment issuing caution that ‘returns likely to be lower and risk higher’. However this is at odds with the investment industry’s marketing efforts.
This aligns with a television advertisement for a large industry super fund, that declares:
9.16% over the last 32 years to 30 June 2016.
Past performance is not a reliable indicator of future performance.
Both statements are accurate.
The super fund’s growth option has delivered 9.16% per annum since 1984.
Meanwhile, past performance is most definitely not a reliable indicator of what investors can expect to receive in the future.
Which of these factual statements do you think would have captured the most attention from investors?
No prizes for guessing the 9.16% is more likely to have made viewers sit up and take interest…especially in a low interest world.
I recall the CEO of a major investment institution on an industry quiz panel where he was asked why the company’s marketing efforts focused so heavily on publicising the fund’s impressive past performance, especially when all knew the future is not necessarily going to be a repeat of the past. His reply was straightforward and unashamedly honest: ‘Past performance sells.’
source article: thedailyreckoning