Is this even a topic you might ask? I promise it is. If you did not know this, Financial Pornography is a huge industry with too many people indulging in this craft knowingly or unknowingly.

First things first, so let us start with the definition of Financial Pornography.

Like most people who just like to Google everything, search for the term “Financial Pornography” and you will be surprised to see a lot of content written on this. Let me share a definition shared on bogleheads.com by Taylor Larrimore:

Financial Porn:

“A slang term used to describe sensationalist reports of financial news and products causing irrational buying that can be detrimental to investor’s financial health. Short-term focus by the media on a financial topic can create excitement that does little to help investors make smart, long-term financial decisions, and in many cases clouds investor’s decision-making ability.

Notes:

Expanded Media coverage, specifically the advent of 24-hour cable news networks and the internet and the tools it has provided the financial industry, had led to a large increase in financial porn.

Examples of financial porn include constant advertisements of easy-to-use trading-strategy products that purport to turn minimal investments into small fortunes, media-coverage of the latest and greatest sector trends and magazines with front pages that claim to have the next 10-must own mutual funds of next year. Many of these products and ideas expose investors to great risks posed by both the movement of the market and the risk of fraud. 

The term was first coined by Emmy-winning Jane Bryant Quinn who is an American personal-finance journalist.”

Now enough about the definition and I am sure you have understood what it really means.

The role of your advisor or you (if you do not have one) is to protect yourself from the effects of Financial Pornography. The effects can be excessive trading, worrying about the markets (losing sleep and health), making irrational calls on investing, unable to manage Greed & Fear and countless other costly mistakes.

A lot of investors think that the role of an advisor is the following:

1. Choosing the best Mutual Fund
2. Beating the market
3. Taking them out of the market before the market falls and getting them back in right before it goes up
4. Delivering High returns without any risk

Imagine you have gone to meet a doctor or a lawyer or any professional… Does the doctor start to talk about himself that I have done 15000 surgeries, I use the Johnson & Johnson stent, I know this, I have won this award and that?

What would you think of this doctor?

Now visualize and think what happens in conversations with financial professionals?

The first conversation starts with products , their Nobel Prize winning Research (I just made this up), how they can take you out of the markets before it falls, how they have access to certain products and strategies and so on? I can go on and on, but I am sure you have experienced it. You know what sells because that is what investors think advisors do.

On the other hand, this is what World Class Financial Coaches do for their clients:

1. Get them to think about what is important to them and set meaningful goals (If there are many goals, help them prioritize them).
2. Plan for contingencies so they never ever run out of money even in these COVID-19 times.
3. Help them save while getting them to live the lifestyle that they desire or is realistically possible. Saving is the bedrock of wealth creation and helping a client figure out his number and help him save is one of their most important tasks.
4. Help them Invest and guide them to be disciplined about their investments.
5. Help them avoid costly mistakes and counsel them whenever they need guidance.
6. Hand hold them through turbulent times, remove emotional biases out of decision making and course correcting in a meaningful way to help reach their destinations successfully.

After all, aren’t you looking for one SIMPLE ANSWER “Am I doing OK? Or Do I have Enough?”

US Supreme Court Justice Potter Stewart once said, “I don’t know how to define financial pornography, but I know it when I see it.”

Now that you know about it, make sure you know it when you see it. Beware of the bullshitters out there spreading too much financial porn.