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Financial Adviser's Confession: The Dumbest Things My Clients Say

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By    |   Thursday, 15 Dec 2016 09:12 PM


Now that I have your attention … please unclench your fist … you can’t punch me in the nose, I’m safely out of reach in cyberland. Take a deep breath, and let me explain.

When I say “dumb,” I mean that respectfully. People are smart, they didn’t just fall off the turnip truck and they’ve been around the block, but there is a lot of bad information out there.

So they bring in a suitcase full of their misconceptions and prejudices.

My goal is to listen and get clear on what they are trying to achieve, clarify where they stand and what needs to be done.

In this process these are a few of the dumb things I hear:

“My neighbor says …”

Nothing very intelligent usually follows this. I ask “What license does your neighbor have to be giving investment advice?” – They will say something like “Oh he’s a plumber but he does really well in the market.” I think it wise to keep your financials private. Your nest egg is too important to rely on people who are not trained, seasoned professionals.

“I Hate Insurance Companies”

Really? All of them? Did the entire insurance industry do you wrong?
Lots of people are not fond of insurance companies. That’s because they have all the money and they are stingy about giving it out. But you still need to insure what you can’t afford to lose. So don’t hate them, just understand that every contract has pros, cons and strings attached. Weigh them carefully and understand the deal before you sign up.

“I don’t pay fees.”

Yes you do. It is important to know your fees, they won’t show on your statements and your broker probably won’t tell you. 67% of Americans think they pay no fees. The average fee on a 401k is 3.12%. Every 1 percent is 10 years of compounded interest of income. In other words, because of compounding, every 1 percent you overpay is a decade worth of income you lose later on in life. Check your fees!

“I do my own taxes”

This is not super dumb it’s just not wise. I know TurboTax makes it easy, I understand. But a good CPA will see things that you don’t. If I spent a couple of weeks on a flight simulator and learned to fly a jet and you had a choice between me or a real airline pilot to fly you to Hawaii, which would you choose? I hope the pilot. Get a good professional, it will save you more than what you spend on the preparation.

“My variable annuity is guaranteed”

Bull. No it’s not. That is just what your broker told you. If your money is invested in Mutual Funds you can lose money. The original purchase premium may be guaranteed to pay your beneficiaries on your death but the invested principle is not guaranteed from market fluctuations. If you have an additional income rider you may get a guaranteed lifetime payout … but a Variable Annuity is a security – Are there any guaranteed securities? NO! The word “Variable” is a clue to what can happen – the value may
vary up or down.

“I’m not going to live that long.”

I've had the engineers come in my office with their calculators and they can tell me exactly what year, month, day and time they’re going to die. So do I advise a plan that stops at 82? Nope. We are all living longer, it’s called longevity, we need to plan for 100.

“I hate annuities.”

This is probably because of misuse. An annuity is just another tool in the shed. It is for income. It is safe but it is illiquid. So you must be careful not to put too much in an annuity and use it for its intended purpose.

Bottom line: Discuss your questions and concerns with a well-seasoned fiduciary.

Someone who will put your interest before their own so you can be a well-informed consumer and make the best decisions moving forward.

Dan Carter, an Investment Advisor Representative for Safeguard Investment Advisory Group, has 18 years experience in the insurance and estate planning industry. Carter also is the radio host for a financial radio program, “The Big Picture Radio Show,” on KVTA 1590, Ventura County’s Gold Coast “News Talk” station. Carter holds California Life-Only and Accident and Health licenses (#0C32681), and holds a Series 65 license, and is registered through the Financial Industry Regulatory Authority (FINRA).

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People are smart, they didn’t just fall off the turnip truck and they’ve been around the block, but there is a lot of bad information out there.
dumb, clients, financial, advice
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2016-12-15
Thursday, 15 Dec 2016 09:12 PM
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