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Should You Trust Your Financial Planner?

In his book The Black Swan, Nassim Taleb, reveals why many experts are nothing more than glorified profiteers who disseminate propaganda rather than factual and/or worthwhile information and knowledge. Taleb documents how certain professions have been cataloged as experts but are really nothing more than partisan publicists.  He enumerates by listing some of the professions where there is absolutely NO evidence of any skills, such as:

“stockbrokers, clinical psychologists, college admission officers, court judges, councilors, intelligence analysts, economists, financial forecasters, financial professors as well as personal financial planners.”[i]

Furthermore, Taleb compares these pseudo-professionals with those professionals where skills are really necessary. Where knowledge and understanding are really supplied to those who consult and/or hire these professionals and are better off because they did. According to Taleb, here is a partial list of some of these valid professionals:

“Test pilots, soil judges, chess masters, physicists, mathematicians, accountants, insurance analysts(experts), and grain inspectors.”[ii]

Here are some of the reasons why financial planners didn’t make the list of professionals which require skills while insurance analysts (experts) did.

  1. Financial planners assume that predicting the future is possible. Insurance experts know that predicting the future is not possible and therefore rely on the respected laws of probability instead of possibility with their advice.
  2. Financial planners begin with specific data and attempt to apply this specific data to non-specific entities, individuals and groups. Insurance experts begin with the science of large numbers and apply the data gleaned from these large scientific studies to specific entities, individuals and/or groups.
  3. Financial planners primarily rely on inductive and abductive reasoning. Insurance experts rely primarily on deductive reasoning.

In other words, as Taleb succinctly states, “…professions that deal with the future and base their studies on the nonrepeatable past have an expert problem.”[iii]  And that is why you shouldn’t trust your financial planner but you can trust an insurance expert.

Being an insurance expert, not merely an insurance agent, requires one to base their advice and recommendations on deductive reasoning.  Deductive reasoning involves actuarial science (the scientific law of large numbers).  Essentially, being an insurance expert is the ability to directly and specifically apply the data derived from actuarial science to another entity, individual or group.  And in so doing, there is a high probability that the entity, individual or group, when adhering to such advice, will experience highly similar results as the scientific data revealed.

Quantitatively, financial planning is predominantly speculation.  Speculation is based on inductive and abductive reasoning, or as it has been classified, an “educated guess.”  But here is the clincher, an “educated guess” or “hunch” may be used as a major or minor premise in a scientific research project where deductive reasoning will logically determine if it is true or false. However, an “educated guess” should never be treated as a solid piece of evidence, as Nobel Prize Winner Peter Medawar states, “In deductive reasoning, the inferences (“educated guesses”) drawn are logical output.  If they are true, nothing needs to be altered, but if correction is needed the inferences are false.”

Of course, these educated guesses remain any financial planners’ greatest nemesis.  In using unproven data or possibilities, they encourage their clients to risk untold financial consequence, while they themselves have absolutely NO financial risk!  Such professions, as Taleb blatantly observes, not only “have an expert problem” they have a moral problem as well.

  • Want to know why Dave Ramsey, The Whitecoat Investor, Suze Orman and the like have NO credibility in the insurance experts’ world? It is because they advise others based on “hunches” and NOT on scientific evidence.  

It is rational to realize that there will always be profiteers who would rather gain at your expense than heed to the scientific voice of logic and reason. Such “experts” have narrow and subjective opinions which destroy millions of people financially because they treat a possibility projection (an “educated guess”) as a scientific fact.  This sort of dogma encourages people to chase speculative returns rather than securing objective probabilities (assets.)  Pathetically, most people could save and control much more capital by consciously applying the science behind the law of large numbers to their finances rather than heeding the advice of these profiteering pundits.

There is NO verifiable evidence that proves the scientific data used by the insurance expert is flawed or inaccurate. While there is untold volumes of evidence that refute the “educated guesses” of financial planners.  And that is why you should consult an insurance expert because they can provide the security, safety and sustainability that everyone needs, guaranteed.  And that is far more valuable than what any financial planner can ever dream of providing.

[i] The Black Swan: Second Edition; The Impact of the Highly Improbable (Incerto). Taleb, Nassim Nicholas
[ii] Ibid
[iii] Ibid