In the movies, villains are usually pretty easy to identify. Whether it’s Bane with his mask, Mr. Potter with his scowl, or Jaws with his…jaws, it’s usually simple to spot the bad guy.
The villains in your financial life aren’t quite so easy to pick out. Unless, of course, we can dress them up like some movie villains that you’d recognize. Let’s give it a try…
The Wicked Witch of the West
Where do we see the Wicked Witch of the West in the financial world? Well, if you think back to The Wizard of Oz, what was her entire motivation throughout the movie?
She was obsessed with getting her hands on the ruby slippers. And she was willing to go to any lengths to get them. She was completely prepared to kill Dorothy to get the slippers, if that’s what was needed. But her obsession led to her eventual demise when a bucket of water to the face turned her into a smoldering pile of green goo.
In the financial realm, we often see people who have a similar obsession with one particular area of their financial life.
It could be their desire to chase maximum returns on their invested dollars. Which is fine if you’re 30. But if you’re 58, your focus should be less about maximum returns and more about minimizing loss.
It could be an obsession with avoiding taxes. Not a bad goal, except when that obsession prevents you from selling an investment that you should sell because you’re too worried about trying to avoid capital gains, or when you pursue an investment strategy strictly for the tax advantages without considering the actual performance of the investment.
So there’s nothing wrong with ruby slippers, but you don’t want to get too fixated on one thing because it usually doesn’t end well for you.
Darth Vader
Lord Vader had completely mastered the Force. The only problem was that he used it for evil instead of good. So Luke Skywalker had to come along and use the Force in a good way to defeat Darth Vader. And then a lot of awkward family issues came to the forefront, but that’s another story.
So maybe this is less about Darth Vader and more about the Force itself. But the whole idea is that the Force itself isn’t good or bad—it’s all how you use it (or how it’s being used against you). And there are many Forces in the financial world.
Take for instance, rising interest rates. That’s a good force if you like keeping money in your savings account at the bank. But it’s a bad force if you like borrowing money, or if you own a lot of bond funds in your portfolio.
Dollar cost averaging is another force. It’s great if you’re putting money into a volatile place like the market because every time the market is down, you’re buying shares of stuff on sale. But when you’re retired and you’re taking money out, it’s no longer a good thing when the market is down because you now have to sell stuff on sale in order to create cash flow. That’s reverse dollar cost averaging working against you.
You want to be sure that you’re able to harness the economic forces around you and use them for good, like Luke, instead of for evil, like his dad. (Oh, spoiler alert: Darth Vader is Luke’s dad).
Ivan Drago
Drago is probably my favorite movie villain, and Rocky IV is probably my favorite of the Rocky movies. Despite the stupid ending where Rocky single-handedly ends the Cold War with a post-fight speech about nothing.
In any event, Drago was as cold and ruthless as the Soviet countryside from whence he came. He only spoke in short phrases like, “I defeat all man,” or “I must break you.” Or, when he dealt a death blow to Apollo Creed, “If he dies…he dies.” (Spoiler alert: Apollo Creed dies).
Not the most compassionate guy you’ll ever run across.
So where do we find Drago in the financial industry? Well, he’s represented by the big wire houses who are completely focused on sales and not the least bit interested in assessing your life and creating a customized plan for you. Drago was all about getting his next KO and moving on to the next opponent; the big wire houses are all about selling a product and moving on to the next person.
To illustrate how true this is, there’s a new law that’s about to be enforced as of next April that will require basically everyone in the financial industry to act as a fiduciary in dealing with their clients. That means they have to act in the client’s best interest instead of just selling them a product, collecting a commission, and disappearing. So now that they’ll be required to do what’s best for their clients, a lot of these big companies are being forced to completely change their business models. What does that tell you?
So the financial villains are there, you just have to learn how to recognize them and put them in their place. Throw a bucket of water in their faces if you have to.