Churned and burned
Some time in the past, a “financial advisor” convinced me that I could make a lot of money trading commodities. Wrong! I figured out he was just “churning” me (putting me into and out of too many positions, just to earn the commission), and I closed the account, buy not until he lost 80% of my money in less than a year!
Related Horror Stories
The “My Products Don’t Have Fees” Advisor
This is the kind of guy that I don’t actually want to punch in the face; I’d rather just have a good chuckle with him. One time, I was competing with another advisor who was offering a fixed annuity as their only investment solution. They were a pure insurance agent, and apparently, that was all he could offer.
When the client chose me as their advisor over the insurance agent, they were not happy, to say the least. They were so disappointed in my client’s decision that they felt compelled to tell them (in a condescending tone) that their products had no fees, whereas mine did, and that they (my clients) were making a horrible decision.
No fees, huh? Well, yes, if you buy a fixed annuity that guarantees you 3%, you do get 3%. But for someone to use the argument that their products have no fees is ridiculous. There’s a fee for everything; there is no such thing as a free lunch.
Lesson learned: If your advisor tells you that their products have no fees, I would suggest you first prevent yourself from bursting into laughter. Then, kindly remove yourself and sprint out of their office.
Keep the case!
"Safe investments"
Just filed my taxes and I’m looking more closely at my finances. I’m pretty good with the basics but feel completely out of my depth with investments.
In 2021 I started a Morgan Stanley investment account with the financial advisor who has been managing my parents’ money for many years.
I invested $67,000 in 2021 and let the advisor choose the stocks/bonds/funds/etc, telling them that I’m extremely risk adverse and I needed safe investments. On Jan 1, 2022, the value was $71,950. On Dec 31, 2022, the value was $58,587. In 2022, I paid $1,025 in trade commissions and $984 in service/advising fees. So basically I paid my advisor $2,000 for her to lose me $13,363 over the course of 2022.
Is this normal? Every time I ask my parents or advisor they tell me “the market is down for everyone.” But my parent love their advisor and thinks the sun shines out her butt and my advisor has a financial incentive to keep me.
Whole life insurance as an investment vehicle
The one stands out and given by multiple of professional or so-called professional is to buy a "Whole Life Insurance" as an investment vehicle plus life insurance coverage vs. a "Term Life Insurance" policy.
Just do some calculations of the future value (Excel formula FV) in 20 years of the estimated monthly premium cost for a $1 million Whole Life Insurance vs. a 20 year Term Life Insurance (for the rate of return, you may assume 8%, in some estimates the long term retun of the stock market if you invest that money in Index Mutual Funds.) – you'll be SHOCKED!
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