Where can you find useful financial information?

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About once a generation, there is a singularly admirable advertisement from the financial services industry worthy of your thoughtful attention.

Finding these rare ads is like looking for a needle in a haystack.  Most of the barrage of marketing from the financial services industry is what we in the industry call ‘financial pornography’; it titillates but does not deliver.

The first admirable ad that comes to mind is an advertisement from October 1948, published in the New York Times by Merrill Lynch: What Everybody Ought To Know About This Stock And Bond Business and now featured in Julian Lewis Watkins book: The 100 Greatest Advertisements 1852-1958.

Written before mutual funds existed, this ad was a 6,450 word, full-page ad explaining in small print, plain English, with no sales pitches, how the stock and bond markets work, and how and why individual investors could profitably and appropriately engage with them. (As a reference point, current best practice for bloggers is to aim for posts with no more than ~800-1000 words.) The ad, quirky at that time and even now, was a runaway success, prompting 5,000 reprint requests in the first week after publication. This expensive and risky marketing innovation was the brainchild of Louis Engel, who had joined Merrill Lynch in 1946 as the Advertising and Sales Promotion Manager.

Louis Engle has another claim to fame. He sparked the first research documenting market returns.

Although hard to imagine now in our data-driven world, in Engel’s time, there were no data about average long-term market returns; as in Lake Wobegon, every money manager was ‘above average’.  Engle was curious and frustrated by the lack of data on market returns and approached Jim Lorie a professor at the University of Chicago School of Business (now Booth School of Business).  Lorie in turn suggested that Merrill Lynch fund a study to develop data on market returns, leading to a $50,000 seed grant financing the founding of the Center for Research in Security Prices (CRSP). CRSP remains today a go-to source of meticulous market data. The study, which is now part of the core curriculum in the history of finance, took more than three years to complete and was published in the academic press in January 1964.  True to form, Engel then published the full study as an advertisement in the Wall St Journal in June,1964: How Good An Investment Are Common Stocks?.

Both of these ads were remarkable for their substantive, useful content and their respectful, plain English delivery of high-quality information. Investors benefited, and took notice.

A current candidate for an advertisement that might stand the test of time is a recent full-page Wall Street Journal advertisement from Brighthouse Financial, a company recently spun-off from the MetLife Insurance Company. The title of the ad is:  The Science Behind Happier Spending.

The ad makes a credible case for how lifetime income annuities provide financial safety for retirees while also enhancing the experience of retirement: “Many people have a tough time making the transition from being a saver—or accumulator—to being a spender.  Without feeling truly confident that assets will work together to create reliable income throughout our lifespans, there is a tendency for people to “over conserve,” often spending far less than they can afford.”  Lifetime income annuities, by creating pension-like lifetime income, make it easier for people to discern how much they can safely spend in retirement on the day to day. Feeling a bit freer to spend, the ad implies, makes it more likely that you will go ahead and spend money in ways that researchers are now documenting add to personal happiness: spending on experiences and spending on others.   (See for example Happy Money: The Science of Happier Spending by Elizabeth Dunn and Michael Norton.)

The contribution of this ad is the clear, plain English explanation of the link between what the economists know (that creating a base layer of inflation-protected lifetime income to cover your basic standard of living is a best practice base case for retirement planning) and what psychologists know (that how you use your wealth is closely integrated with personal well-being in increasingly specific and documented ways).

Excellence in financial planning melds technical and personal considerations. The purpose of financial planning is personal wellbeing, not just building the biggest portfolio you can imagine and then not knowing what to do with it in retirement.

A couple of caveats about the Brighthouse Financial ad and MetLife, the company from which Brighthouse Financial was spun off:

The ad references research created by an inhouse unit of The Wall St Journal advertising department, not by researchers publishing in a peer-reviewed journal.

More concerning is that MetLife recently exited the IncomeSolutions.com platform, a distinctly consumer-friendly distribution channel for lifetime income annuities. At this point neither MetLife nor Brighthouse Financial offers their products through this cutting-edge distribution channel.  At Income Solutions, annuities are sold in a real-time competitive auction of life-time income contracts, with contracts constrained to be from financially strong insurance companies with apples-to-apples fine-print contract terms. On such a platform, investors can see the real price of the lifetime income contract that they are considering for purchase.

Investors, like other consumers, deserve the ability to see a market-determined, competitive price for potential purchases.

In contrast, buying from an agent connected with a single insurance company, e.g. as how you would now purchase lifetime income from MetLife and Brighthouse Financial, is distinctly old paradigm, and oddly dissonant with Brighthouse Financial’s recent cutting-edge advertising campaign.

Individual investors are not always well served by our industry.  But we take the good with the bad.  It’s good that Brighthouse Financial is promoting correct thinking about spending in retirement.  Too bad neither Brighthouse Financial nor MetLife, in contrast to many of their competitors, is willing to sell their annuity contracts in a competitive purchasing forum.

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