Financial Snake Oil

​Sometimes the highest risk to your finances can come from legitimate companies with less than perfect intentions. In the 19th century it was common for travelling salesmen to come to town in a wagon promoting special elixirs that purportedly would heal “all that ails you.” One of the most common elixirs was made from snake oil. Snake oil has been used in Chinese medicine for centuries as a topical skin treatment with some benefits for healing minor pain. The problem with snake oil was that those who sold it in early America often claimed benefits far beyond its normal use. Consequently, the term “snake oil salesman” remains to this day as a description of someone who sells a product whose use and benefit is greatly exaggerated. Because these products may have some limited positive benefits, they can be a risk to consumers who are led to believe they can do much more.
I have a friend who believes in one such thing, and anytime someone has a sickness of any kind, he gives assurance that his magical product will cure it. You could have something as simple as a cold or as deadly as cancer, or maybe you just have a food allergy. It doesn’t matter what it is, he will insist that his product will cure it. His product does in fact have some value for certain things, but the transferring of that value to “all that ails you” is what makes it dangerous. In our enlightened age it is foolish to believe any single product can cure all diseases, or even many of them. We would never accept an auto mechanic who claimed the same procedure would fix any problem with our car.
Snake oil salesmen also exist in the financial world. They travel around with their show, and their well-polished pitch, complete with pictures, graphs and testimonials, portraying their products as the solution to all problems. Some are well-meaning but their single product focus should be an immediate warning flag to potential investors. Their products may have good value if used properly and in the right situation, but all too often they are sold too broadly with implied claims that such financial solutions will “cure all that ails you.”
I have yet to find a financial product that solves all problems or that is appropriate for all people. Just as we have numerous medical treatments for the various human ailments, there are numerous financial solutions as well. If my doctor prescribed the same cure every time I visited him, I would find another doctor. Despite its current negative connotation, in the 19th century there was nothing inherently wrong with snake oil. The problem was with its promoters who greatly exaggerated its potential benefits to the unsuspecting public. In your search for financial solutions always remember that each product has its use and an otherwise good product can have negative consequences if used in the wrong situation.