This was the headline to a Google Ad I saw for a relatively new company, a company I thought was trying to do the right thing. I work hard and take very seriously the concept of offering honest financial planning advice. Hands up if you would like some honesty in financial services?
It doesn’t matter in what context you say you write this sort of rubbish. If you have an ad that starts with “12.3% Investment Returns” what you want people to believe is this is what they will achieve if they invest with your company.
Nothing can be further from the truth. There are an infinite number of factors that go into creating the returns within an investment portfolio. Most of these cannot be predicted. So to predict any sort of future return is pure fiction.
The inherent flaw in the fund management industry is that they can’t very well advertise a fund unless it has done well. The problem is that the marketing can only ever tell you what you could have bought, what you could have earned. It can never tell you what you will earn by investing now and in the future. So to ever publish return figures is not telling what you will be buying.
As consumers we are used to buying what is sold to us. Descriptions for products are heavily regulated to ensure we know what we are buying. To brand and advertise financial products and services with what used to be is simply misleading, regardless of the context.
Past performance should be a confidential discussion between adviser and client. It’s a personal thing, specific to the client’s individual needs. It has no place in front of someone else whose return requirements are likely to be different. So not only is it misleading, but it’s also inappropriate.