As Seen on TV Asset Allocation

I want to saw a boat in half, then tape it back together and take it out on the water.  I didn’t know I wanted to do this until I saw a commercial that runs during Cleveland Indians games.  The spokesperson could be the dad on any sitcom, straight out of central casting.  This enthusiastic Everyman uses a miracle tape to fix everything from underwater leaks to boats that have been sawed in half.  I have absolutely zero need for this stuff, but I feel compelled to buy some.  Why?  For the same reason we have to talk certain clients out of an As Seen On TV Asset Allocation.

Universal Theory of Infomercials

My wife has a universal theory of infomercials.  She says the key to a good infomercial is to take something simple and make it look like rocket science.  Sure, your current knife can cut a tomato, but can you cut a penny in half and then slice picture perfect tomato slices?  Your pan can cook eggs, but can you melt legos and have them slide right off?  You’ve got exposure to stocks and bonds, but what about global macro, managed futures, merger arbitrage, mezzanine debt, business development companies, low volatility, timber, and thousands of other little corners of the investment world?

Here’s a secret that advisors hate to share:  a simple 60/40 portfolio (60% stocks / 40% bonds) often leaves more complicated portfolios in the dust.  One of the reasons a trusted investment advisor is so important is that almost no one can actually stick to a portfolio that simple.  Even if simple gets us to our financial goals, human nature demands a complex solution, preferably one with lots of trading/allocation shifts.  A good advisor can keep these impulses in check with a financial plan that is focused on the big picture, but allows for prudent adjustments (rebalancing, tax loss harvesting, etc) along the way.

Whose Problem Does This Solve?

I don’t own a boat.  I don’t want to own a boat.  I have no need for tape that can fix a leak underwater.  And yet… if I see this stuff at the store, I’m going to buy some.  Don’t be a sucker like me.  When you see the guy with the ponytail on TV talking about options, stop listening.  Don’t worry about what the hot sector is.  Don’t try to invest alongside Warren Buffett, Bill Ackman, or any other “guru”.  It will cost you more than the $19.95 I’ll be out when I finally see that waterproof tape in the As Seen On TV section of my local Walgreens.

Just like an infomercial, the personalities of financial entertainment don’t know your situation.  I really don’t need a cooking pan that can withstand a blowtorch and a gravel bath.  Most people don’t really need to trade their accounts every day.  Stories focused on the long-term don’t sell commercials, though.  How many people would tune in to watch estate planning tips or asset location hints?  It’s safe to say that a 30-year-old with $100,000 needs different advice than a 65-year-old with $50 million, but the TV serves up the same breathless commentary on the SnapChat IPO to both.

As Seen On TV Asset Allocation

Just like an infomercial, financial TV can make you search for a solution to a problem you didn’t know you had.  Rather than common sense, they peddle overly-complex solutions that are deaf to investors’ true needs.  Instead of running an As Seen On TV Asset Allocation, investors should seek out tailored advice from a fiduciary or risk sawing their own boat in half.

Photo by mamamockingbird77