Tag Archive for: Business

How Financial Media Pulls the Strings

When I was a kid, my older sister Kim would often prey on my youth and ignorance. While this harassment took many forms, the instance I remember most was being “persuaded” by my sister and her friends to let them dress me up as a girl with makeup. It’s surprising how easily she convinced me to go along with her schemes like I was a puppet, and she was the puppeteer pulling the strings as she desired. As a young kid, I didn’t stand a chance.

Eventually, as I got older (and a bit wiser), I caught onto the game my sister was playing. Realizing that she was manipulating my emotions and reactions gave me a fighting chance, allowing me to cut some of those strings from time to time.

Those manipulative moments with my sister growing up parallel the relationship investors have with the financial media. Too often the financial media plays the role of puppeteer, pulling strings that shape and direct the emotions of investors, usually to increase their own profits. Investors need to develop the same kind of awareness that I developed with my sister, understanding the motives behind financial media in order to reduce vulnerability.

If It Bleeds, It Leads
Many have heard the old adage when it comes to nightly local news, “if it bleeds, it leads.” Financial media has adapted this mantra a bit, focusing on greed or fear to lead the way when it comes to capturing investor attention. They understand if you’re dreaming of making a fortune or scared of losing it all, they’ve got your attention. Next time you’re watching your favorite financial TV channel, watch for the following puppeteer moves:

  • Notice how often words like plunge, plummet, or surge are used both in conversation and plastered in all caps on the screen. These words push our internal greed and fear buttons, which causes us to watch longer.
  • When discussing stock market performance during the day, note how often financial TV references the Dow versus the S&P 500. Why? The Dow is trading around 35,000 while the S&P is trading near 4,500. One percent of the Dow is 350 points while one percent of the S&P is only 45 points. Which number scratches your greed or fear itch more? The larger number, of course. It’s a subtle but intentional way of exploiting investors’ emotions.

Financial Media Motivators
On any given day, the market experts on your favorite financial news channel make dozens of market predictions. Do advertisers pay more money for commercials based on the daily number of accurate market predictions? Of course not. Ad rates are driven by viewership, commanding top dollar for more eyeballs rather than spot-on market predictions.

It would be nice if the financial media’s primary goal was to support or enhance an understanding of your investment goals, but that’s not the case. Financial media’s primary goals are strong ratings. Put plainly: big viewership leads to higher company revenues and profits.

To be fair, financial media will always have a hard time focusing on your investment goals. The advice they give is unaware of your investment profile: short-term or long-term horizons; low, medium, or high-risk tolerance. It’s tough for them to narrow their commentary based on your personal goals, whether it’s funding college tuition, buying a second home, or retiring comfortably. You wouldn’t take exercise advice from a trainer who didn’t know your body type or fitness goals, why take investment advice from experts who know nothing about your financial goals?

Opinions Not Accuracy
Former Forbes Magazine CEO Steve Forbes once said, “You make more money selling advice than following it. It’s one of the things we count on in the magazine business – along with the short memory of our readers.” Many investors tend to believe that financial experts are paid because of the accuracy of their market predictions. Mr. Forbes made it abundantly clear that even media leaders themselves know this isn’t the case.

“You make more money selling advice than following it. It’s one of the things we count on in the magazine business – along with the short memory of our readers.” — Steve Forbes, FORBES Magazine

Financial experts are paid to have an opinion, NOT to be right. And like any good salesman, their opinion should be extremely convincing and somewhat entertaining, which they usually are! In baseball, before a batter steps into the batter’s box, you know the likelihood of that player getting a hit before they take a swing. Their batting average is available for all to see. When was the last time you saw a market expert’s stock pick average posted on the screen as they stepped up to make another market prediction? There’s a reason you don’t see it and it’s the same reason your college career counselor told you not to put your GPA on your resume if it wasn’t impressive.

Financial Education or Entertainment?
Given how financial media is compensated, it’s fair to ask if they’re in it to educate or entertain investors. One way we can answer this question is by looking at the people hired to produce some of these financial news shows. Susan Krakower is the former producer of Jim Cramer’s highly rated Mad Money show on CNBC. Her illustrious production career also includes stints at The Jerry Springer Show, The Maury Povich Show, and The Sally Jessy Raphael Show. You connect the dots.

It’s not that financial media is all bad. There are many highly respected sources for financial news. But it’s critically important that investors know that the primary goal is strong viewership and ratings, not addressing individual financial goals. Without this awareness, the greed and fear drivers can put investors at great risk of excessive trading, worrying about the markets, and making irrational investment decisions that can wreck financial plans.

By recognizing that often financial media’s goals are not aligned with our own financial goals (or risk tolerance, or time horizons), investors can prevent their emotions and focus from getting hijacked and instead stay focused on their long-term plan.

by JOHN FISCHER, CFA®, CFP®
John is the Chief Investment Officer (CIO) at Mosaic Family Wealth. He leads the firm’s Investment Committee which shapes the firm’s investment philosophy and strategy for client portfolios. He also serves on Mosaic’s Leadership Team. A 20-year industry veteran, John is most passionate about helping people understand how emotions relating to investments can be more important than the investments themselves in achieving financial goals.

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Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing in this content is intended to be, and you should not consider anything in this content to be, investment, accounting, tax, or legal advice. If you would like investment, accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs.

Mosaic Family Wealth, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Mosaic Family Wealth, LLC and its representatives are properly licensed or exempt from licensure.

4 Profitable Ways to Invest Your Time

One of the most valued benefits of a successful life is the ability to control your time. Dedicating yourself to endeavors of your choosing can lead to long-term impact and help shape a lasting legacy as you move from success to significance.

Here are four ways you can invest your time that are worth considering:

#1: Join A Board – On your path to financial success, you have likely engaged with a variety of boards working to impact wide-ranging social issues. As a result, you can call to mind those that functioned healthily and those that struggled to find their footing. Imagine the impact a seasoned business leader can offer to the success of a board’s mission? Individuals who know how to see success and can contribute insights and experience to help an organization achieve its goals are highly sought after.

Investing your time on a board is a meaningful way to leverage your professional knowledge towards a cause that is meaningful to you. Your success will be tangibly seen at both an individual level through people’s lives changed and organizationally as your time investment turns into organizational impact. In addition to contributing towards an important cause, board service often yields valuable networking opportunities as well. Amplify your voice and thus your significance using the lessons learned across a successful career to make a difference in the world around you.

When considering investing time in a board, consider these options:

  • Local boards are often seeking seasoned guidance from professionals across various industries to help them move to the next stage. Serving a term in a cause-related group will elevate their output and deliver meaningful value back to you.
  • Thriving national or global organizations might afford you an opportunity to widen your circle of influence while benefitting from the fresh perspective you can provide.

#2: Higher Education Speaking – We all have people that have inspired us. You likely can recall a moment when someone shared something publicly in a way that ignited a lasting effect. For many, this experience happens at the collegiate level, with a lecture or course that alters your life trajectory. Universities are constantly looking for professionals that can fill speaking slots that will serve to inspire their students.

Taking a speaking role at a college or university is a terrific way to offer a glimpse into the expertise that led to your personal success. It’s an ideal way to not only invest your time but create a legacy. You might consider visiting your alma mater to offer a keynote speech or sharing a guest-lecture series on a topic on which you are an expert. Public speaking of this type allows you to summarize your vast experience in a memorable narrative with potent takeaways most professors would love to showcase in their classes or schools would like to offer to their student body. The lessons learned along your path to success, including roadblocks and failures, can serve as a clear inspiration for those just beginning their journey.

When considering investing your time through public speaking at a university consider the following:

  • Identify a university or academic institution where you might already have a connection – your alma mater or a one where you have previously invested financially for example.
  • Develop a lecture or a speech around key lessons learned along your path to success, and make sure to include plenty of stories that bring those lessons to life.

#3: Champion an Event – Invitations to charities, auctions, and galas are par for the course for successful individuals. Unfortunately, they’re not all organized with the same level of passion, quality or value add for those that attend. Imagine leveraging your time towards helping to guide a charity event of some sort into the kind of opportunity that would most appeal to yourself and your peers.

Serving as a committee chair can allow you to use your unique points of view to help an organization meet its goals in the most impactful way possible. Likely, you have access to a trusted network that will take your meeting or call, support with their expertise, or even contribute specific assets, solely because you are involved. Like starting a non-profit, begin by clarifying your role to ensure your time spent offers maximum impact while allowing others to take on tasks more aligned to their expertise.

When considering investing your time by championing an event, consider the following:

  • Personal alignment with the event goal will be the key to true personal significance and satisfaction.
  • Choose an event or organization that allows you to wholeheartedly get involved.

#4 Go One-on-One – Big plays can offer big rewards, but sometimes an even greater difference can be made as you invest your time more individually. You most likely have someone or a select number of people in your life who you credit with guiding you at some level during a crucial point on your path towards success. As you consider how to invest your time, choosing to mentor someone or simply spending time offering guidance is an investment that may lead to possibly the greatest personal significance.

Like the person who saw the spark of success in you, choosing the right person with whom to invest your time is essential. Many people will likely be desirous of your time, opinion, and connections, but few should receive it. Consider investing in a person already on a path toward success but in need of guidance. Your personal experience and success can offer valuable wisdom that can’t be found in other ways.

When considering investing your time with mentoring, consider the following:

  • Intentionally structure time with the person you are mentoring so that your investment pays dividends in actions and opportunities.
  • Consider the amount of time you are willing to invest. Mentors are often sought out in greater frequency in pivotal times along a person’s career journey. Make sure to be clear about the amount of time you can commit.

You’ve worked hard to take control of your calendar, now allow that freedom to give you a more meaningful return as you invest in purposeful opportunities. Wisely investing your time allows you to take your personal success and transform it into lasting significance.

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Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing in this content is intended to be, and you should not consider anything in this content to be, investment, accounting, tax, or legal advice. If you would like investment, accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs.

Mosaic Family Wealth, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Mosaic Family Wealth, LLC and its representatives are properly licensed or exempt from licensure.

The Compan(ies) You Keep

When it comes to building your wealth, it’s just not about how much you earn that is important. Those seeking significance make sure they focus on earning with a purpose. One of the best ways to earn with purpose is through the company you keep… that is, the actual companies in your portfolio. 

On your wealth-building journey, there will be times when growing your net worth will require buying or building a business. 

IF YOU WANT TO BUY AN EXISTING BUSINESS… keep in mind that it’s not always as easy as it seems.

Sure, buying an existing business can lead to significantly faster and less risky returns on an investment. Your acquisition usually gives you an established and proven business…. instant team, established customer base, cash flow, inventory, distribution, etc. You’re able to get into an existing market fast and are able to get instant returns in most cases.

Buying an existing business though also means taking on someone else’s vision and framework. Although you can always work towards tailoring the business to your own specs, you’ll have established infrastructure to work around.

Buying an existing company usually follows one of four paths:

  • The Turnaround: These companies are usually in disarray which makes them great targets for takeover by someone who can create immediate value by improving existing systems.
  • Eternally Profitable: The proverbial cash cow company. These established companies have no obvious threats to their model which makes them pricier for acquisition but more valuable in the long run.
  • High Growth: These opportunities come around when an existing owner is typically overworked and is looking for an exit from a business that has remarkable numbers in terms of growth, revenue, and earnings. Keep in mind that exits tend to equal pricey, but you get a business ready to deliver in return.
  • Platform: This is for the buyer who has a proven skillset that can solve the deficiencies in an existing company. They buy with an intent to pivot the business towards a new way of operating, hoping this change will quickly move the company to the next level.

To make an acquisition work for you:

  • Make sure you have someone on your team with development experience. A development executive can quickly understand the needs at the new company and outline the opportunities.
  • Integrating an existing piece of business requires finesse and careful consideration. You’ll want to keep IT, HR, accounting, and other systems in mind, determining how to integrate them into your existing platforms or figuring out ways to efficiently run them in parallel. 
  • You’ll likely need more than just legal assistance. Have solid financial controls in place ahead of the acquisition to protect your existing investments. If the new addition to your portfolio fails, you don’t want it to crash your entire empire. 

IF YOU WANT TO GROW YOUR BUSINESS… make sure to be realistic about the work it will take.

Investing in real estate is one common way investors build wealth. Building and growing a business is another key approach that generates income that can impact your overall net worth. Growing something from scratch can also offer independence, flexibility, and the thrill of fleshing out your own vision.

Making your business a wealth-builder and not just an income-generator requires creating value. This means moving beyond producing a commoditized product towards offering something unique and hard to replace. You want to turn your business into something that will be missed if it goes away. Growing your business with this kind of value in mind makes it an asset on your balance sheet, alongside property and investments, that can eventually be sold. Making your business more than a side hustle can turn it into a prime contributor to your overall wealth.

To make expanding your business work for you:

  • Ask yourself if your business offers the growth opportunity you are seeking. Nothing is worse than scaling a business that doesn’t have adequate demand.
  • If your market is mature, you may not be able to extract the level of return you desire, even with an infusion of cash and time. So, do extensive research into parallel industries or other segments of your current industry that you are not engaged in to see if there is space for innovation. 
  • Plan ahead for potential costs related to an expansion, including building & equipment costs, new tax implications, inventory, and supply chain needs, and of course, expanded personnel.

Whether you choose to buy an existing business or expand your own company, the wealth advisors at Mosaic Family Wealth are available to provide guidance along the way. From cost-benefit analyses to mapping out the best strategic routes, our team is available to make sure that your journey towards significance is as smooth as possible. 

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Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing in this content is intended to be, and you should not consider anything in this content to be, investment, accounting, tax, or legal advice. If you would like investment, accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs.

Mosaic Family Wealth, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Mosaic Family Wealth, LLC and its representatives are properly licensed or exempt from licensure.