There’s been a big increase in the last two years in the number of financial advisers on social media. A recent survey showed that 81% of advisers now use social networks for business, and 79% of firms reported gaining assets from social marketing— up from 49% in 2013. QE interest rates.
I ought to declare an interest here. I earn a living helping evidence-based advisers to attract and retain clients by producing and sharing content on social media, so no one’s happier about this trend than I am.
But there’s an aspect to it that’s really starting to grate, and that’s the number of advisers posting about macro-economics. Every time, for instance, the Federal Reserve, the ECB or Bank of England ponders interest rates, my Twitter timeline is clogged with comments and articles of the will-they-or-won’t-they-raise-them variety. Then there’s quantitative easing, as in, Can we expect less of it, or more of it? Either way, what will it mean?
Now, if I were an economist I’m sure I’d find these discussions interesting. But I’m not. Nor are most advisers. And nor, more importantly, are the vast majority of people they’re trying to engage with. So why do advisers feel the need to be involved in such debates?
There’s a whole range of reasons why anyone posts anything on social media. I suspect a common reason is that it makes us feel like experts on a subject when patently we’re not (personally, I’m a world authority on the England cricket team and what’s gone wrong at Aston Villa).
To be fair, advisers probably do know more than the average investor about economics. But that’s not the point. Even if your adviser has a First Class degree in it, reads the FT from cover to cover and can quote the GDP of each of the G8 nations, what does it actually matter?
The implication, of course, is that superior knowledge and understanding of these issues will help you, the client, to anticipate future market movements and therefore make better investment decisions. But even the best economists struggle to predict the future. To quote JK Galbraith, “the only function of economic forecasting is to make astrology look respectable.” And even if your economic predictions are right, that doesn’t necessarily give you an edge as an investor. Markets frequently move in different directions to the economy and at different speeds.
The bottom line is that market prices reflect the opinions of millions of market participants and the latest analysis of some of the sharpest minds on the planet. All known information is baked into the price of each security — and that includes the global consensus on, for example, when, where and how fast interest rates will start to rise again.
Your adviser doesn’t know if or when Europe will expand QE. Perhaps not even the ECB President knows yet. In due course, those questions will be answered and the markets will respond, by which time it will be too late for you or your adviser to do anything about it anyway.
At best, your adviser’s two cents’ worth on the Greek crisis or the strengthening dollar is completely irrelevant. At worst, it’s a harmful distraction. You don’t hire an adviser for his predictive abilities. You hire him to give you a plan that will stand you in good stead whatever happens on the economic front.
Crucially, your adviser should also be helping you stick to your plan. He shouldn’t adding to the noise; he should be urging you block it out. Future rate rises are completely out of your control. An adviser who is constantly speculating about them on Twitter isn’t doing you any favours.
(Featured image: Amanda)