Look at the industry from the dark side

By Michael Lovas

AboutPeople


I have an old (eccentric) friend who runs a contrarian Web site. Surprisingly, it's grown in popularity, and now attracts millions of visitors each month.

Why is that important? Because of two things:
    1. The numbers -- Millions of people see value in the content on that site.

    2. That content is drastically different from what you read in the traditional financial media. It's drastically different from what you tell your clients. But, is it drastically wrong? Is contrarian planning wrong or ill-advised? Not when it predicted the economic collapse. Not when it accurately predicts the market movement. And, not when the investing public has grown skeptical of traditional advice.
Talk is cheap, so let's look at a few of the most recent contrarian headlines. But, before you look, the point to remember is that with each hit to the financial industry's integrity, these ideas become more believable to your target markets. If you don't address them, you flirt with denial, and denial is the last step in the fall into failure. Here are the headlines and dates:
  • 07/28/09 -- Spitzer: Federal Reserve is 'a Ponzi scheme, an inside job'

  • 07/28/09 -- How Will Agriculture Investments Be Affected by New Deadly Wheat Fungus?

  • 07/25/09 -- World Prepares to Dump the Dollar

  • 07/22/09 -- Florida congressman Alan Grayson laughs in Ben Bernanke's face - priceless!

  • 07/22/09 -- How to Become a Better Investor
(Source: www.silverbearcafe.com)

The implication in those headlines is that there is more going on than the mainstream media is telling us. Is there really nefarious wheeling and dealing inside the inner sanctum? Actually, it doesn't matter. The point is more basic than that. Knowing that a "dark side" even exists, and that it is widely read, should inspire you to use such an approach. So, how will you use that information to demonstrate your credibility?

If you just ignore it, isn't that like jamming your fingers into your ears when someone disagrees with you? If you discount it and scoff at it, you're ignoring the millions of people who are reading and considering the plausibility of it. Knowing that millions of people read this type of material, doesn't it make sense to become familiar with it and prepare a logical, cogent counter to it?

The kind of headline we don't see in mainstream media are things like: "Whacko Contrarian Accurately Predicts Economic Collapse." "Conspiracy Buff Defends US Constitution." Instead, we see headlines like these:
  • Hockey star says money manager bilked him of $43M

  • Next Financial Group fined $1M for failure to supervise branch managers

  • Broker captured in Spain pleads guilty to fraud

  • Ex-Morgan Stanley exec accused of stealing $2.3M from firm

  • TD Ameritrade settles ARS charges with SEC; Schwab denies charges of misrepresentation

  • Report: Wall Street, bank bailouts could cost $24T
(Source: InvestmentNews Daily)

You could probably list pages and page of headlines like that. Heck, they're in the news every day. But, the important point is the message that's received by the investing public (your target market). Don't those headlines imply an industry infected with fraud and greed? Let's list the implications. Please realize that these are not my opinions; they are simply the implications -- the messages that someone could discern from interpreting the headlines. And, the implications are:
  • Financial firms have no integrity and cannot be trusted.
  • Financial executives are self-serving and greedy.
  • Financial advisors are deceitful and cannot be trusted.
Now, picture yourself talking with a prospect who mentions a contrarian idea. He says, "Aw, the markets are manipulated." Or, "Between taxes, commissions and fees, the whole system is stacked against the small investor."

And, what do you say in response?

The economy has changed. The investing public is no longer comprised of trusting innocents. They've started thinking that maybe when the kid yells, "Wolf! Wolf!" there's actually a wolf out there. Is it your responsibility to load your weapon? Should you understand the logic and arguments? Will you be prepared to discuss it, or will it catch you by surprise and bite you on the neck?

What to do about it
    1. Learn everything you can about the contra-argument so when your prospect makes a contrarian statement, you can use it as a discussion to demonstrate your knowledge and credibility.

    2. Offer contrarian ideas as an option. Say, "This idea falls outside the envelope, but it's worth talking about."

    3. Explain that the most successful investors follow a different logic, and that's the logic you follow, too.
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