You know I love making people laugh. Lately, I’ve been having fun picking apart financial hot takes I usually find on TikTok. Some of them are so bad, they’re good. Well, good for a joke, at least. But I also use humor to cope with things that really piss me off, and with all the terrible money hacks on social media, even I’m reaching my fill.
Bad financial advice takes on many forms. Sometimes it’s straight-up wrong. Other times, it’s wrong for the moment, circumstances, or person. The common theme is someone trying to persuade you into doing something that financially benefits them more than you. In practice, I see this when clients transfer their accounts for us to manage, and I notice they’re placed in complex, high-commission, or illiquid products. The investments are inappropriate–I never would’ve chosen them–but I can’t call them wrong. They’re just icky. And I’m pretty sure someone else benefited from them more than my client did, which deeply bothers me.
Where bad financial advice turns dangerous is through social media. People can only see what they are shown. Our attention spans have now been calibrated to 90-second videos, where we almost never have enough context to evaluate the merit of the advice-givers and whatever the hell they’re talking about. The more content we binge, the more our reality gets distorted. Our brains start to play tricks on us. Every 20 year old can’t be driving a Lambo, can they? Is everyone really getting rich but you? I know my favorite reality TV stars aren’t all millionaires, but from a scroll of their feeds, they look like trust fund babies. This may seem silly, but it’s aspirational to many who wish they could live this way and can’t distinguish what’s real from what’s not.
And then they become the perfect targets.
Three types of dangerous financial content are currently circulating on social media. Let’s examine them to give you a clearer picture of what’s really going on.
MPI (Indexed Universal Life Insurance)
A small group on TikTok pushes an insurance product called Maximum Premium Indexing, or MPI for short. MPI is a form of indexed universal life insurance, which borrows against itself to accelerate the policy’s growth. The primary goal of MPI is to produce tax-free income at some point in the future. These policies feature an investment account that limits your returns on both the upside and downside. In exchange for limiting investment losses to 0%, investment returns on the upside are capped at 10%. But this does not mean the policy can’t lose value.
Got it? That was a lot.
The main problem with MPI is how it’s marketed. Explaining complex insurance products in short-form video is a heavy lift, and so much time is wasted mocking financial advisors or calling traditional strategies like 401(k)s and Roth IRAs trash that they are effectively burying the lead and muddying the facts. In these clips, MPI associates breeze through calculations on whiteboards, which always result in the product they’re selling coming out on top. You can see the pros and cons of traditional strategies written on the board, but only the pros of the MPI product written next to them. Red flags have to wave when there’s no objectivity in a sales process. Obviously, there are reasons to not use life insurance as an investment: they tend to underperform traditional strategies; they can lock up your money for a period of time; and they require consistent funding and maintenance over decades to work as intended. Yet, these concerns never seem to make the cut.
I don’t sell insurance now, but I did for a long time. Teaching clients how these policies work is no easy task. There are detailed illustrations to review, financial concepts to understand, risks to accept, and fees to disclose. It’s an imperfect, commission-based product that hinges on getting a lot of assumptions right in order to work out as intended. Moreover, the National Association of Insurance Commissioners has concerns regarding the sales and marketing practices of IULs and products like MPI. I can’t say I’m surprised. Even more concerning are the findings of a 2021 study conducted by Daniel Gottlieb and Kent Smetters, which found that 88% of universal life policies do not end with a death benefit claim. They lapse.
When there’s no objectivity in marketing and a complete disregard for a product’s inherent complexities, you are being misled by design. MPI and IULs might be a good fit for a handful of people in limited situations, but convincing millions on social media that it’s hands-down the best solution isn’t correct.
Across all platforms and age groups, you are bound to find a “guru” selling an online stock trading course. The typical video involves an energetic trader displaying a particular stock chart on their screen. Often we have no idea which stock or security the chart represents, but that doesn’t stop the creator from pointing to red and green lines representing the change in price of whatever stock they're trading. Similar to betting on horses at the track, they’ve gamified the stock market, jumping up and down with excitement until they close or sell their position. When it’s all over, they brag about how much money they made and how easy it was to make it in such a short period of time. They want you to know that if they can do it, you can, too. It’s entertaining, but it’s also trash.
Let me be clear: I have a deep respect for my colleagues who successfully trade stocks for a living. They are smart, dedicated, and experienced professionals who deal with immense amounts of pressure on a regular basis. Most have spent years or even decades building trading systems customized around their specific personalities and preferences. Those who have made their careers from trading will be the first to tell you it’s hard and should only be considered after first building a strong financial foundation. They will emphasize the importance of long-term investing so that if you choose to trade stocks with some of your money, you won’t ruin yourself. There’s clearly a huge difference between the real professionals and the creators you see in your feeds.
My friend Peter Tuchman runs Wall Street Global Trading Academy and can actually teach you how to trade stocks. Peter has been a trader on the floor of the NYSE for almost 40 years. I don’t think you can find a more serious, credible, and competent trader. I’ve had several conversations with Peter about his curriculum and his philosophy around trading stocks. His approach is practical, educational, and importantly, transparent. When you compare what Peter does to the clickbait trading courses slung from strangers on the internet, you’ll see it’s a matter of night and day.
I like real estate and so do my clients. Owning property can be one effective way to grow your wealth and generate passive income, but it's not the only way. Social media is littered with real estate zealots who believe you either invest in real estate or nothing at all. Similar to the MPI salesman mentioned earlier, the real estate maximalist disparages conventional wealth building strategies to further an agenda of–you guessed it–selling you a real estate masterclass or something like it.
As with all investments, real estate has advantages and disadvantages. Unique tax benefits, inflation protection, appreciation, steady cash flows for income properties, and equity you can borrow against are all desirable features of owning real estate. On the flip side, real estate can tie up your resources, consume your free time, increase your exposure to all sorts of liability and crush your cash flow if rent checks stop rolling in. The housing crisis of 2008 is an extreme example but a solid reminder of how bad things can get in the real estate market when you’re over-levered and economic conditions take a turn.
Most of the viral content surrounding real estate will rarely touch on these realities and drawbacks. Instead, they focus on how quickly you can acquire property by using as much leverage as possible. Similar to stock traders, they’ll tell you how easy owning real estate is, especially after taking their course. However, it’s usually just another setup designed to fool you into thinking their way is the fastest way to accumulating generational wealth.
Without a doubt, social media gives us access to consume information in remarkable ways, and I am all about digesting financial knowledge by the means most approachable to you. Educating yourself around money, however, is more dynamic than some of these creators make it seem. Relying on a short video from the internet to explain financial concepts and products in a vacuum will probably not be enough. If they interest you, then use them as a starting point and build upon your interest with articles, newsletters, books, and even speaking with a financial professional if that makes sense for you.
And by the way, there are many creators in the money media space doing it right. Katie Tassin, Ramit Sethi, Chelsea Fagan and Brian Feroldi are four examples of financial content creators that can objectively teach you about money, personal finance, and investing. So the next time you’re caught in a doomscroll of financial content, just take a step back and question whether you’ve gotten the full story, knowing that whatever you’ve learned probably won’t earn you a Lambo. At least not in six months. Maybe ever. Sorry for the IRL disappointment.
The Pathless Path by Paul Millerd - Shortly after writing This didn’t age well last month, my friend Paul was kind enough to send me a signed copy of the book he wrote early last year. The Pathless Path is a great read on how to think differently about work and life, especially in the post-COVID work landscape. It was interesting to see him share similar feelings about vacations and taking time off early in his career. Don’t forget to check out Paul’s Substack too.
Siete Leguas Reposado - This is the second time a tequila has made the Likes section. Yes, I like tequila. I’ve been unable to find a bottle of one of my favorites, the Fortaleza Reposado, so the local liquor store turned me onto Siete Leguas. It was an amazing recommendation, because it’s super close to Fortaleza and is slightly less expensive. I was expecting a slightly bitter bite, but I can’t say I found it. If I am right, these bottle will be hard to find, as well.
CalDigit Thunderbolt 4 Element Hub - I was looking for a way to plug just one USB-C cable into my MacBook Pro and get every single one of my accessories to work including a big ass monitor with a webcam plugged into it. The Thunderbolt 4 Element Hub does just that. It’s not the cheapest USB hub on the market, but it’s a high-quality option that won’t let you down.
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Well done, my boi!
Great article! Young people need to see this stuff to counter the constant bs they're being fed. You're a breath of fresh air Doug. And keep up the great work on twitter. The cliff bar was a classic