Friday, November 8, 2013

Selling at the Expense of Buyers

Part of the reason I was lured into financial education is the importance of exposure to quality information. The wealth of resources available to the general public can be misleading. it is mportant to understand what resources to consult when making critical decisions, especially when personal finances are involved. 

Twice this past month, I was fed info by financial institutions that did not jive. The data presented to me seemed right, the math added up, but when I stepped back to evaluate it, something did not sound right. 

One incident involved an informal mortgage pre-approval. As I watched the lender key in my assets using advanced calculators available on the Internet, he eventually turned up numbers that seemed off. He went through the list, and we discussed my mortgage options but then read off payments that were too manageable under the terms we had selected. Had I accepted his initial offering, my mortgage payments would have been considerably lower than an apartment. After pressing him further, it turns out he was sharing rates that would have included additional fees on top of my monthly mortgage and home insurance payments.  

Financial data is supported by all sorts of calculations: ratios, historic prices, fancy reports. It's kind of romantic when you think about it. A laywoman who finds herself with extra cash on hand may feel secure enough to just jump in and invest, maybe relying on the wealth of information available. Maybe she's fortunate enough to meet an experienced  financial advisor who promises her the impossible: high returns, the dream home, a comfortable retirement. Without knowing how to evaluate the intent and quality of the data presented, this hopeful investor winds up disappointed. Know those numbers that accompany portfolio activity? The fine print waives that performance. It's not guaranteed. This is common sense to many, but not all.  Like the example of the woman who comes by extra cash and wants to invest. Or the high school student who wants to start preparing for her financial future early. What these hopefuls may not be aware of is that money is anchored to some sort of intention. If you're on the receiving side of it, it's the more you get the merrier. If you're on the giving side of it, it's the opportunity for security and a better lifestyle. Just because they see numbers that add up, they are blinded by the actual consequences. My monthly mortgage at five percent down payment seems pretty manageable at face value. But dig a little deeper and the additional insurance, interest rates, and other obligations, you realize it is not the reality.

How this is still allowed to happen after all the effort to protect consumers the past decade is odd. What it boils down to is the bottom line and a good marketing strategy. Just as any other goods sold in the general market, the goal is still to sell products, even financial ones, at the cost of the consumer while benefiting the seller. 

No comments:

Post a Comment