Mortgage financial advisors pushing risky loans

My former adviser recommended that I, on the eve of retirement, take out a mortgage on my fully paid-for home to buy a variable annuity from her. I would have gone from having zero layers of humans between me and a valuable asset (100% equity in my home) to three layers of humans between me and my asset.

First layer was her (collecting the fat commission on that annuity). Second layer was the insurance company selling that notoriously questionable product, and lastly the fund managers of the mutual funds into which the insurance company would invest my annuity dollars. Everybody would be taking their cut, and I would be last in line for value. How did I fix the problem? You'll notice I began by describing that person as my former adviser.

I had just met with some folks who had recently moved in-state from the East Coast. They were referred to me because they were unhappy with the advisor that they’d been with. The advisor had worked for one of those big insurance companies that also have their own proprietary mutual funds.

The advisor had always made the claim to them that he could use any type of investment that he wanted. What I found funny about that statement was when you actually looked at their account holdings, over 80% of all their investments were with that company’s mutual funds; their own proprietary product.

What was even more a bunch of crap, was the actual funds themselves were horrible.

Their track records were bad, their fees were high, and their performance resembled that of a 16-year-old trying to make it in the NFL; it just wasn’t cutting it. Lesson learned: If you’re using an advisor who works for a big company, be on the lookout if they always recommend their own company’s funds.

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!