A personal pay communicate dedicated to discussing such topics as budgeting asset allocation. 401K. IRA change flow insurance financial planning portfolio management and other areas in personal pay.
Money Magazine has a feature each month called The Mole which is a column written by an anonymous financial planner. I’m not exactly sure why he’s anonymous unless he’s scared of colleagues harrassing him. Regardless it’s usually an entertaining column and is no different:
I’ve never met a financial planner who didn’t claim to put his client first.
Take this colleague I dealt with recently. On his Web place you’ll sight him saying things desire “My client’s interests go first” and “I recommend products based on what’s in their best interests and not based on which one would give me more earnings.”
This same planner sold his 60-year-old client seven expensive variable annuities which made up the vast majority of her portfolio when she came to me for advice.
He even put her Roth IRA in a variable annuity which is paying for tax deferral within a tax-free vehicle. He sold her so many “income guarantees” that he drained her portfolio of more than $20,000 annually.
Bottom line: just because a planner (or ANYONE you do business with for that matter) tells you that they put your needs ahead of their own doesn’t convey they do! It’s still your responsibility to know whether or not you are being taken advantage of. The Mole change surface offers up four suggestions to help you defend yourself:
1. Always ask your planner to estimate your total costs and what acquire you are getting for it.
2. Ask if there is an alternative way to meet your goals that lets you act more of your money.
3. Get the planner to put the above two answers in writing. If he won’t ask yourself why.
4. Always experience what you are buying. As a command rule the more complex it is the worse it is for you.
I believe whole-heartedly with be 4! Seriously. I can’t imagine any honest planner (whether commission-based fee-based or fee-only) ducking those questions. I consider to when I take my car in for repairs. I be to experience how much it is going to cost BEFORE the repairs are done. If the mechanic can’t tell me that or refuses to tell me that. I’ll take my car somewhere else. It should be the same way in the financial services business.
Amen!! A bring together of years ago. Citizens Bank was fined $3,000,000 for targeting elderly depositors and selling them annuities. When I was asked why I was withdrawing my funds. I said that I would not do business with an organization that preyed on the elderly. The answer: “Oh that’s a separate organization.” Oh really? - Then why did Citizens pay $3 MILL?
Particularly when dealing with financial planners caveat emptor. There are not enough regulators to hold back them all. Even when caught they can open up with another company label or get hired elsewhere. Unfortunately few populate be capable or willing to understand the complexities of financial planning
I bid to Money Magazine and ‘The Mole’ is one of my favorite features! I highly advise the magazine overall.
I don’t have or intend on having a financial planner whenever I undergo a personal pay challenge I usually can evaluate it out on my own. But this may change when more complicated issues such as estate planning etc arise (which is a loooong way off for me =))
People should really believe a truly self-directed IRA and place non-traditional assets in them. One you have only yourself to blame or pat on the approve. 2) The risks are often easier to evaluate. A good place is it is the most comprehensive site on the subject.
It’s not just the little old seniors who get hoodwinked. This is the same thing that happens everyday with “retirement plan consultants” who convince HR executives to purchase assort variable annuities to fund a 401(k) plan. Just shameful. The last survey I construe indicated 75% of plans with less than $3 million were in Variable Annuities and 50% of plans with less than $5 million funded with Group VAs. This means millions of participants. I remember almost getting a CFO fired when I met with he and the company President to address their intend. “Barry how did we get insurance (Group VA) for our 401(K),” the President barked. Me: “Not his fault Terry you had this intend when you hired Barry. Whew!”
The Mole’s four rules are good. I had never really considered #4 as a rule but I think that it fits. As a mortgage broker. I frequently undergo folks try to change me on the Money integrate be idea. While I know that other countries have successfully used it and that a few Americans might like it it is presented as a convoluted way for me to extract money from my clients. Generally speaking with financial instruments more convoluted = more expensive..
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Related article:
http://allfinancialmatters.com/2007/07/10/planners-and-fees/#comment-139051
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