For several decades, I’ve written, lectured, and consulted on the difficulties of getting good advice about personal finance. Among the problems is a pervasive imbalance of information. When one party to a transaction knows a great deal more about the subject than the other, there is the potential for exploitation. Most financial practitioners have command of industry practices, norms, and manoeuvres far beyond the knowledge of even extremely smart “regular people.” They also have experience and training in various routines, techniques, and tricks-of-the-trade that give them an enormous advantage over their clients. An economist would describe this as an “asymmetry of information” between the advisor (or industry rep) and the client.

Such an information imbalance leaves most people extraordinarily vulnerable to being taken advantage of.  To overcome this, one must negotiate the process of dealing with the so-called “financial services industry” from a position of relative strength. Such advantage, though, requires study, preparation, knowledge, and skill in several distinct areas. The individual must close the various knowledge gaps between herself and a bunch of practitioners who eat, sleep, and breathe this stuff.  It can be done – but not without hard and time-consuming work.

Many people believe themselves very effective in taking on this challenge.  They think themselves highly knowledgeable about investing, financial markets, taxation, and timing. They also consider themselves skilled at dealing with a very sophisticated industry that often relies on trickery. Some of those folks are mistaken in their self-assessments.

Enormous difficulties must be overcome to avoid being out-foxed in the contemporary financial arena.  One of these is a contemporary focus on technical matters of finance that leaves clients vulnerable. The press, various companies, marketing, and even financial education (such as it is) tend to emphasize methodological information. They are usually obsessed with particular financial instruments and the mathematics surrounding them. The spotlight is on what types of investments are available, probabilities of future events, ways to insure against financial calamities, etc. These nuts and bolts are not sufficiently correlated with the search for best outcomes that one is undertaking. Indeed, they can easily become a distraction that obscures the more important exploration. What is the individual really trying to achieve? How can clients avoid the industry’s various haircuts? How do I get from where I am to the best possible outcome for me and my family?

I frequently encounter people so focused on the minutia of finance that the most fundamental questions are essentially ignored. Don’t be one of them.  Keep your eyes on the real prize… and do your homework!