In a recent Journal of Behavioral Experimental Finance study - "Individual differences in susceptibility to financial bullshit" (excuse the language), a group of researchers developed a measurement scale to “assess consumers’ ability to detect and distinguish verbal financial assertions that are presented as true and meaningful but are actually meaningless.” Basically - how many investors out there believe what Wall Street is selling?
The research paper is involved; if you like scientific details - dig in.
In summary, consumers most vulnerable to financial BS were more likely to be “young, male, have a higher income, and be overconfident with regards to their own financial knowledge.”
- An individual’s ability to detect and distinguish financial BS from genuine statements was positively correlated with age. Older individuals were generally wiser than their younger counterparts.
- Females had lower susceptibility to financial BS than males.
- People with lower incomes were better at distinguishing meaningless claims than those with higher incomes.
- Education levels were uncorrelated with susceptibility to financial BS. Researchers hypothesized it may be more important to be street-smart than book-smart when recognizing financial BS.
When working with financial professionals, it’s important to ask yourself some key questions to gain transparency and eliminate meaningless claims:
- Do I understand and have clarity about my own finances?
- Do I have a well-planned accumulation and withdrawal strategy until the end of my life?
- Do I understand the realistic expectations of my portfolio returns?
- Does my spouse understand our financial plan without all the BS?
Building wealth and ignoring Wall Street can appear intimidating and insurmountable. It doesn’t have to be that way. Let’s strategize together and sift through the financial BS.