What can investing ads on Google tell you about the financial industry?

We are bombarded with investing ads all the time. The financial industry is spending billions for advertising and most of the time people don’t even realise what this means for their financial future.

A while ago advertising agency WordStream did an analysis of the most expensive expensive keywords in Google. You probably know that Google makes most of it’s money with pay-per-click advertising. This means that companies pay for their ads when a person clicks on them. And because Google is very smart, they rank advertisers who are prepared to pay the most at the top of paid listings.

This means that in certain industries there is very fierce price competition when companies bid on certain keywords. That is why the cost per click (CPC) for different keywords can be sky-high.

And when you take a look at the chart of the 10 most expensive keywords on Google, you can see that most of them come from the financial industry. And some of them have CPC’s of more than $50 or even $100. in other words this means that the company is paying $100 per person who clicks on their ad. Crazy!

WordStream says that the top 10 most expensive keywords are:

1. Insurance
2. Loans
3. Mortgage
4. Attorney
5. Credit
6. Lawyer
7. Donate
8. Degree
9. Hosting
10. Claim

And if you understand business logic, you can quickly deduct that because the financial industry can afford to pay the highest prices per lead, they must have have the highest margins.

How does the investing ads spending affect you?

It’s very simple. I believe that most financial products are very bad for customers. That are the products that have the highest margins. And because they are very lucrative for the sellers, the financial industry is selling them very aggressively. But on the other hand these products are the worst ones for the customers. Case in point: combined life insurance products that have life insurance and investing component (eg. Whole life, Universal life…). These products are very popular, because insurance reps are very motivated to sell them (they get a lot of commissions).

And the clients expect quite a lot of these products, but in the long run they get very little. Commissions and fees eat up most of their invested money over time and they are left empty-handed.

That is why my best financial advice is: if the financial product is advertised a lot and your financial advisers are trying hard to sell it to you it usually means that you should stay away from it.

Or in other words: The most aggressively sold financial products are the worst ones for the investors.