Unreliable Financial News Making Investing, Retirement Decisions Harder

There are some things plan advisers and sponsors can do to help defined contribution (DC) plan participants refrain from reacting to unreliable financial news.

By Rebecca Moore | April 28, 2017
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Unreliable financial news is impacting Americans’ ability to make retirement, investment and health care decisions, according to a telephone survey of 1,018 adults conducted in March 2017 for the American Institute of CPAs (AICPA) by Harris Poll.

Kelley Long, CPA/PFS and member of the AICPA Consumer Financial Education Advocates group, who is based in Chicago, explains that such news includes articles with scare tactic headlines that really have not a lot of basis. It can also include phishing websites, such as “Click here to learn more about how you can make $10,000,” then it steals a person’s financial information. In addition, reactions to world news, such as the Greek financial crisis and Brexit caused people to reacted strongly, and they lost money.

The survey found more than three in four (77%) Americans feel it's important to act fast to make financial decisions when breaking financial news becomes available, with 40% saying it's very important to act quickly.

Financial news mediums use scare tactics based on something happening every day that investors shouldn’t react to, Long says. She notes that defined contribution (DC) plan design intends to discourage participants from playing the market. “With mutual funds, you get end-of-day pricing no matter when you make a call to change investments. Participants don’t understand that,” she says.

There is widespread awareness about the issue of unreliable financial news. Nearly three in five Americans (58%) believe unreliable news is a serious threat to their financial decision making, with more than half of those saying the threat is very serious. Those sentiments are consistent for both genders, among household incomes and across generations.

According to the survey more 63% of Americans say the spread of unreliable news has made it more difficult to make critical financial decisions. Specifically, they’re having a harder time with health care decisions (44%), investing in the stock market (40%), retiring (36%) and buying or selling a house (35%).

“There are people who are afraid of losing all their money and feel they can’t retire. They invest too conservatively for their timeline,” Long notes. “In addition, pre-retirees move everything to cash, but when the market doesn’t fall, they move back to equities. This does them harm, and they accidentally delay when they can retire.”

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