Just about every three months or so, the same phenomenon occurs in my mailbox. A rash of postcards and mass-mailed letters inviting me and a guest to a “free” lunch or dinner where I will be given the secret formula to a bullet-proof retirement or a guarantee of abundant tax free income for life or some other alleged benefit that my broker, my accountant, my lawyer or some other trusted advisor does not want me to know. My friends and neighbors all get the same. Welcome to another edition of Open Season on Senior Citizens and Mini-Madoffs on the Hunt.
If you can’t recognize deception at it’s finest… you may be one of the “suckers” who ends up paying the check for the free dinner… or worse… having your money moved into an inappropriate and/or unsuitable indexed annuity… arguably one of the worst consumer-friendly financial products ever derived.
My mother once told me that a half truth makes a great lie, and in today’s unfortunate world of fraud, deception and free meals, half-truths are the “soup du’jour”. For instance, one invitation encourages me to find out how I can turn my IRA into a tax-free account. Can this be done? Sure it can. That’s the “half” truth. The other “missing” half is that you do this by likely converting it to a Roth IRA, paying all the required taxes on the account in the process. Doesn’t sound so appetizing now, does it?
The word GUARANTEE seems to appear in dozens of places on the menu, but the “whole truth” about the word is nearly impossible to find. Of course this seemingly innocent oversight is not lost to the host… only to most of the invitees. You see, many seniors associate the word “guarantee” with the FDIC or other U.S. Government agency. The whole truth is that this is seldom the actual case. Insurance products are generally guaranteed by the issuing company making the guarantee only as good as the financial strength of the backer. How’d you like your account guaranteed by AIG… or the old K-Mart…or Lehman Brothers… or ABFS? Suddenly the guarantee is about as appetizing as that huge tax bill you got for converting your IRA… but it’s the whole truth!
The key is, as always, doing your homework and thoroughly checking the background of the person holding him or herself out as a financial advisor. What licenses and professional designations do they hold? Do they have any history of regulatory involvement for prior violations of the laws? Are they willing to give you a written statement of “fiduciary” responsibility? (Remember, that’s the “F” word which means your best interests are protected under the law). Is their practice regulated by FINRA or the SEC? (Insurance agents without securities training or licensing, posing as financial advisors, will attempt to dance around this question). Who or what is issuing the “guarantee” on this product… and just what is the product? An indexed annuity? No market fees?
So how does your host earn a living? How does he or she get paid? Commissions? Is this a sale? I thought I was getting “free” advice along with the “free” meal. No market risk? So what is the risk? Inflation? Liquidity? Business? Wake up America! Risk is everywhere! There is no such thing as “No risk”. In 1557, Thomas Tusser, an English poet and farmer coined the phrase “A fool and his money is soon parted” as included in his Five Hundred Points of Good Husbandry”. Four hundred and fifty four years later it still holds true.
If you are, or have been frustrated with your current financial situation, go out and seek qualified, fully licensed, accredited, professionally designated help… leave the free dinners compliments of some “celebrity” insurance agent on the table. You and your loved ones will be glad you did!
Tags: boomers financial planning money financial help financial advise
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