Financial myths are so easy to perpetuate because they’re simple and convenient. The human brain loves a good phrase or adage because it provides a quick reminder for a complex situation. The truth is much harder to convey. It takes time, context, and a little hard work to explain and prove things that are true about the world. This is relevant across every industry, which is why one mission of Truth Concepts is to help advisors discover and explain mathematical truths.
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Fact vs. Fiction
Perhaps one of the best examples of this idea that a lie is easier to tell than the truth is to explain is in our common adages. You’ve heard many of them before:
- The customer is always right…
- Curiosity killed the cat…
- Great minds think alike…
These are all commonplace phrases. And while there’s truth to them, they’re actually incomplete. Here’s what you may have forgotten:
- The customer is always right… in matters of taste. As a salesperson, you’re probably all too aware of times the customer isn’t factually correct. Their opinions and preferences, however, are valid. This is why we don’t shoot down customers yet we DO educate them.
- Curiosity killed the cat… and satisfaction brought it back. The beginning of the sentence might have you believe that curiosity is a bad thing. However, curiosity is the foundation of invention and discovery. It can be worth satisfying curiosities.
- Great minds think alike… and fools seldom differ. You don’t benefit from surrounding yourself with “yes-men.” While there’s value in a like-minded community, don’t let that stop you from individual thought.
When you put these phrases into perspective, they take on entirely new meanings. Yet people frequently latch onto incomplete thoughts because they're catchy and easy to remember.
Oversimplified Financial Myths
This same principle is why many people believe in “typical” financial advice. Something like “buy term and invest the rest” is short and catchy, so why wouldn’t it be true? Unfortunately, it’s much harder to explain the context to clients: that term insurance and equities shouldn’t be your foundation, it should be your backup, or your “bonus.” You’ve got to build your foundation on something solid, with guarantees like whole life insurance.
Really, that’s just getting started. Another factor that’s difficult to explain to clients is human nature. After all, we all want to say we’ve got good habits. And yet, many people consistently struggle to save money. Which begs the question: how many people who buy term insurance are actually investing the difference, or even saving it?
Chances are, those numbers are slim, and most people are simply spending the difference. By the time they’re in their 50s or 60s, their savings may not be what they expected, and those funds are insufficient to “self-insure.” And, depending on how life has treated them, they may no longer be able to get whole life insurance.
Instead, if you have clients lock-in a policy at their current age and health, they can get a solid whole life insurance policy. While the policy is going to cost more than a term insurance policy, it comes with living benefits, including the cash value account. And since premium payments directly impact cash value growth, they can view premium as a savings deposit. That means for a single transaction they are both getting insurance (permanently) and putting money in savings.
That’s difficult to explain. There’s no catchy turn of phrase. It just takes a desire to dig beneath the surface and ask questions.
You Have to Dig Deeper
This may seem like a problem with no clear solution: after all, how do you get people to stop latching on to financial myths with simple phrases? The answer is, you don’t. It’s better not to replace or create new catchy “phrases,” because all this does is perpetuate the gimmicks. And like the many phrases above, the meaning can quickly become shortened and warped, anyway.
Instead, start from a place of curiosity. If you yourself are willing to dig deeper, rather than accepting something at face value, it becomes an easier ask of your clients. You don’t have to learn everything in one day, nor do you have to teach your clients everything in one meeting. If you can help them understand the truth about whole life insurance today, you’ll have 30+ years to dig deeper with them.
Don’t be satisfied too easily—be curious, and seek the bigger picture in all things. It’s how we all grow.
Getting curious? Attend a Truth Training and start seeing financial concepts and myths in a new light with our suite of calculators. You’ll learn straight from Todd, and learn how you can get the most from your software.
To learn how to advance your practice in precarious markets and through an emotional recession, read our article about how to introduce whole life insurance as a safe wealth builder for your clients.