A Wall Street insider draws back the curtain on how financial firms take advantage of individual investors—and delivers the information and insights you need to turn the tables. Nationwide brokerage firms have perfected the secrets for how to legally fool the rest of us into giving them our hard-earned money.
Written by a renowned leader and financial reform advocate who has seen every trick in the book firsthand, Outsmart the Money Magicians reveals how biased the financial system often is, and helps you see through the illusions, understand exactly what is happening with your money, and make investing and tax decisions accordingly. Outsmart the Money Magicians provides clear, easy-to-understand action steps to protect your portfolio and maximize your wealth-building efforts. Readers will learn the 14 Questions to Ask a Financial Planner and access templates for the kinds of reports Wall Street should be providing. With an example of the kinds of notes you should get after meeting your advisor and specific charts about how to look at your profit, this book gives experts and beginners alike an inside view to how Wall Street should improve.
A Wall Street insider draws back the curtain on how financial firms take advantage of individual investors—and delivers the information and insights you need to turn the tables. Nationwide brokerage firms have perfected the secrets for how to legally fool the rest of us into giving them our hard-earned money.
Written by a renowned leader and financial reform advocate who has seen every trick in the book firsthand, Outsmart the Money Magicians reveals how biased the financial system often is, and helps you see through the illusions, understand exactly what is happening with your money, and make investing and tax decisions accordingly. Outsmart the Money Magicians provides clear, easy-to-understand action steps to protect your portfolio and maximize your wealth-building efforts. Readers will learn the 14 Questions to Ask a Financial Planner and access templates for the kinds of reports Wall Street should be providing. With an example of the kinds of notes you should get after meeting your advisor and specific charts about how to look at your profit, this book gives experts and beginners alike an inside view to how Wall Street should improve.
“I’ve been saving for so long! It doesn’t seem right that this is all I have to show for it.”
“When my investment statement arrives, I don’t even open it. Even if I go online, I can’t easily see what they are charging me or the performance of my overall portfolio.”
“I know people make more money than me, but they’re paying less taxes than me. How can I pay the IRS less? I feel like the system is rigged.”
With over twenty years in finance as a money manager and leader of financial advisors, I’ve heard statements like these a lot. I’ve written this book to shine a light on why people often feel like they don’t have control of their money or their financial future. It’s not because they aren’t intelligent or don’t have enough financial experience. It’s because there are specific ways the system actually is rigged and distorted so that our perception of our money is manipulated, just like how a stage magician does illusions. And also, like those stage tricks, these financial manipulations are easy to see through with just a little bit of education and focus.
Outsmart the Money Magicians answers, “How’d they do that?” by offering clarity on the five biggest, most widely-accepted financial distortions happening everyday all over America. Each of these financial illusions are systemic, pervasive, and most people are not even aware that their perception is being manipulated. If you’ve ever thought that it shouldn’t be so hard to examine your investment portfolio or hold your financial advisor accountable, you’re right. The system distorts your view of your money in the same way that a magician stacks the deck against the audience. It’s not evil or bad, but once you know how the magician creates the illusion, you simply cannot be tricked so easily anymore. And once we all are in on the trick, the financial industry will need to improve because the old, tired illusions won’t work like they did in the past.
In this book, I describe the IRS and Wall Street as tricksters and illusionists – the Money Magicians – because they are successfully distracting Main Street and distorting our view of our money. Deception and misdirection are acceptable in a magic show, but they are not at all appropriate in the arena of finance. The way we look at our investments and what we see when we examine our portfolios are both important because it determines how well we navigate toward our financial goals. When individuals perceive their money accurately, the path to success is a lot shorter and easier. If you have come to this book, you might be seeking a clearer view of your finances. Perhaps you wonder if you’ve missed some opportunities for advancement and achievement. Maybe you’d like to gain more control over your financial future.
To understand how this book will help you win back control over your portfolios, let’s visit the African savannah where the sun shines bright and the dry wind whispers through tall yellow grass. The occasional acacia tree provides some shade as lions, gazelles, and other animals seek their food and water. Those trees all consume carbon dioxide and give off oxygen. This is not a good or bad thing. It simply is. The lions hunt and eat the gazelles. The great predators hide in the yellow grass, upwind from the herd, and strike when their prey has wandered close. For the lion to survive, it needs to eat the gazelle, so it’s natural for it to hide upwind.
But from the gazelle’s perspective, this system seems rigged. Each time a lion almost magically appears out of the yellow grass, the gazelle’s wonder, “How’d he do that?” Imagine if the herd of gazelles could somehow understand the problem lurking in the tall yellow grass. They’d think, “The lion is tricking us by hiding in that yellow grass! We can’t see the predator there, so he’s taking advantage of us on purpose!” Now that they know the lion didn’t magically appear out of nowhere, they’ll never go near the tall yellow grass again. And just like that, things would change. It doesn’t mean the lions won’t survive nor that another gazelle will not be eaten. It doesn’t mean the “African savannah system” as a whole has been broken. It’s just that the scales would be slightly more balanced, and it would be harder for the lions to fool the gazelles.
The American financial system has its own lions and gazelles. If Wall Street and the IRS are the lions, then the regular everyday investor on Main Street is the gazelle. Thankfully, this isn’t a story about people getting eaten, but it’s valuable to think about how the brokerage firms and the tax man survive. Transactions, investment activity, consumerism... these are the food of the financial lions. If nobody bought a single stock at all, the stock market would grind to a halt and the system would be broken. Transactions are the lifeblood of that system. If people didn’t buy and consume goods and services, it would be very difficult for the IRS to collect taxes.
The fact that Wall Street and the IRS require transactions and consumerism is, by itself, not a bad thing. They are not the evil villain in this story, but if you’re a gazelle, it is very helpful to know how their regulations might be encouraging (or for the more cynical, manipulating) you to do unnecessary transactions. It’s certainly useful to know how Main Street is being helped (duped) into consuming goods and services when they would behave differently given a clear understanding of the danger hiding in the grass.
No matter your politics, goals, or level of wealth, this book is a systemic call to action because after you read it, you will not save money the way you do now. You won’t look at investment statements or your performance reports the way you do now. If enough people stop wandering near the tall yellow grass, the U.S. financial system itself could be forced to improve because the lions will be forced to change their ways. Regulations themselves will need to change because the game we’re all playing right now is rigged against us in devious, yet meaningful ways.
Once you know how an illusion is performed, you cannot go back to being tricked by it. Growing your financial stability isn’t some scary esoteric business that you need to get a PhD to understand. You don’t need to keep giving money and power to people who don’t have your best interest in mind and, in a way, you already know that. For example, you probably use your cell phone for hours every single day even though you have little to no understanding of how it actually works. Maybe you are comfortable with the product because Apple isn’t trying to pull one over on you. Just the opposite, Apple has a reputation for being so helpful and customer- focused, they have a famously loyal clientele.
Just like you can learn the myriad of new ways you can use a cell phone beyond just calling someone, you are capable of reading and understanding how to save and grow your financial security, regardless of the technical intricacies that make the system work. Main Street can interpret basic data. We can do critical thinking. And we certainly can do these things while partnering with the right financial experts who truly have our best interests in mind.
Somehow, individual investors have accepted that we cannot avoid going near the tall, yellow grass. Main Street has fallen into the trap of believing that financial security is like some magic show where only the magicians on stage know what’s really going on. Outsmart the Money Magicians will help you escape that trap and improve your financial wellbeing. This book shows you how to avoid the lion’s hiding spot so you can maximize your net worth. In the process, you’ll come to see through the biggest, most powerful illusions performed by Wall Street and the IRS.
PART ONE
THE ILLUSIONS, EXPLAINED
What’s Inside
How the system tricks people into:
-- spending more than they should
-- lowering their own net worth
-- misunderstanding performance and buying overly risky investments
-- misunderstanding profit versus loss and selling investments worth keeping
-- seeking deductions for tax purposes that decrease their ability to save
Each chapter in Part One begins with a familiar magic trick performed by an actual stage magician. The stage magician astounds the audience with devices and techniques that are very similar to (if not exactly the same as) the methods of the Money Magicians. Spoiler alert: you will discover how magicians perform their stage magic! After you know how the magician did that chapter’s trick on stage, I’ll describe a financial illusion performed by Wall Street and/or the
IRS as Main Street typically experiences it. Then, I’ll pull back the curtain to explain how the Money Magicians did it so you can’t be duped in the future.
In the first chapter, you’ll learn how the system tricks people into spending more than they should. If you’ve ever said, “I pay myself first!” or “I’m a good saver because I set it and forget it,” then this illusion is affecting you right now because you think the “it” in that statement is your savings. But you shouldn’t be setting your savings because this ruse is the foundation for lifestyle creep, keeping up with the Jones’s, and being a consumer instead of a saver.
Next, we explore wealth versus income. I ask readers to remember why they buy investments in the first place. Wall Street works hard to make sure we focus on growing our net worth, but is that truly our goal? Is “more and more” really the answer or are you being tricked into being a consumer who asks the wrong questions? We’ll discuss how people get manipulated into owning things that lower their net worth because they think it signals success. This is the “profit-by-sale” mentality and will be very helpful to anyone who has ever said, “I’ll just flip it!” or “I’ll turn around and sell it for more than I paid.”
In Chapter Three, the illusion centers on investment performance. Sadly, actual profit often is not the same as reported profit. If you’ve ever heard friends brag about their portfolio’s return while wishing your portfolio was doing better, then you’ll enjoy learning about how Wall Street takes advantage of your natural tendency to gravitate toward an easy measurement even if it’s wrong and misleading. That easy, but wrong, measurement is Average Annual Return and it’s one of Wall Street’s biggest illusions.
For the fourth illusion, we’ll focus on the way Wall Street reports to Main Street and discuss how the IRS has influenced the data you see when you examine your finances. You will see how investment statements systemically distort your understanding of both profit and loss by using data known as cost basis. That distortion is incredibly powerful because this illusion can trick you into thinking investments are performing poorly which often leads to selling (more transactions).
In the final illusion to finish out Part One, we’ll discuss tax brackets and why it’s so wrong, yet so common, to hear people say, “I don’t want to be in the highest tax bracket,” or “I need to buy some things I can deduct so I don’t have such a high tax bill this year.” We’ll see how Main Street regularly gets tricked into spending money that’s rightfully theirs to save. This chapter is for anyone who has ever said, “I don’t want the IRS to get any more of my money,” or “At this point, I thought I’d have more savings.”
Let the show begin!
Times are tough, the prices of basic goods are increasing and inflation is shooting higher than the thermostat of my broken boiler. In these most perplexing of financial times, is it truly possible to successfully navigate the complicated world of investments and come out on top? In Christopher R Manske's recent publication, Outsmart the Money Magicians, the answer in simple; yes, you can.
Spanning nearly 260 pages, Manske leads readers through this prickly subject matter, with the help of fictional case studies and magic tricks to highlight where would-be savers and investors can carefully side step any of the potential risks and potholes.
This book is very informative and Manske's subject matter and passion for the topic of financial empowerment is clear from the off. Even though the book is written by an American author through an American economic lens, as a British reader it is very easy for me to grasp the hints and tips and understand the general economic principles detailed.
Where I am perhaps slightly less enamoured with this book is in the quantity of words. There are points where it feels like an excessive use of preamble is used to set the scene of the case studies, including the use of contemporary magic tricks which did not always tally up, in my mind, with the black and white financial guidance. Sadly that meant, in places, having to repeatedly read sections due to inadvertently skipping over words. Also, and this could be due to the version I was reviewing, but there are some minor formatting tweaks that need addressing (in the version I was able to review, "<H1>" references existed where headings occurred).
Outsmart the Money Magicians is a good book as an overall package even if I personally I do not feel every word is needed. Slimmed down, this book could have been a snappier and more direct read, without sacrificing the quality of content.
AEB Reviews