To Your Wealth Column

Media Influence on Investment Decisions

BY MICHAEL P. HAUBRICH, CFP

April 3, 2003

During the past few weeks, the nation and indeed the world has been held spellbound by the 24/7 flow of news and information from Iraq. It is in these crisis situations that the true power of the media to influence becomes painfully obvious. The daily barrage of war reports and images consumes the airspace and brings the conflict to our homes and offices. It’s little wonder that we’re distracted from the day-to-day issues that took priority before March 20.

The media possesses a unique opportunity to escalate attention, intensify emotion and to sway opinion. It is for these reasons that consumers must take caution when absorbing news and information of any kind, and particularly when it relates to your finances. Some pundits in the financial community refer to items in the popular press as financial pornography. While I believe that comparison is painting with a fairly broad brush, I do agree that the glut of available information is often self-serving, erroneous and lacking in substance. What you really must avoid is the financial quackery and self-serving advice that is often cleverly disguised and neatly packaged in public relations articles.

Financial pornography –while it is a strong phrase, is an accurate description – for it creates unrealistic expectations based on lurid portrayal of money as easy to get. Best examples are articles with titles like "Ten Great Investments That Can’t Lose," "The Five Best Mutual Funds To Own Today" or "Wealth Without Risk". The goal of print media is to sell its publication along with its advertising, and what better way than to feed into the public’s thirst for excitement and advertiser’s desire for customers of their wares. I do scan a good number of them each month, if for no other reason than to keep me up-to-date on the junk news that is being proliferated to an already overwhelmed population so I can better advise my clients.

In defense of the media, however, I know that an unbiased, properly treated message published in a magazine or newspaper can also help consumers access the information and resources they need to make sound financial decisions. I’ve experienced first-hand the ability to reach large numbers of people through print, television and radio. More importantly, I consider the moral and ethical obligation of conveying accurate, well-researched information that presents both the pros and cons of a given topic as essential to maintaining credibility.

With so many resources available, it’s a challenge just to identify which trade publications offer the best information. The access to information is further compounded by financial news programs on television. If it’s true that information is power, then every individual possesses the ability to be extremely powerful. What is not so clear, however, is exactly how to determine if the information is intended to serve your interests or to help pad the coffers of someone else.

I look for three things when reading financial news and information. First, I assess the credibility and reputation of the publication or television show. Next, I determine if the piece is presenting an unbiased view of the topic without some apparent conflicts of interest. Finally, I compare the information I find in one source with information on the same topic from a different source to see if there is alignment or divergent perspectives that may prompt additional investigation. If news or information passes through my three-phase filter, I feel more confident in validating and supporting it with my clients who often rely on me to help them navigate their way through the maze of content.

For my daily reading information, I rely on The Wall Street Journal to offer the conservative perspective, The New York Times to offer the liberal position and the local paper for local news. For up to the minute financial market news, I begin each day with a healthy dose of CNBC morning programming, knowing that much of that content won’t make it through my well-practiced filter. Just because I rely on the above-mentioned sources doesn’t mean they do not occasionally present a biased view or story.

My advice is to carefully assess what you consume from the media. Consider using my three-phase filter approach before basing decisions on information that might turn out to be biased, inaccurate or misleading.

Michael Haubrich, CFP, is president of Financial Service Group, Inc., a registered investment advisory firm in Racine, website address www.toyourwealth.com.