The Problem with the Industry: Unqualified Advisors and Poor Investment Choices

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!

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.

One man I knew inherited from his parents their entire and sizable estate, which was put in trust; and there was a trustee named by the last surviving parent to settle the debts of the estate, sell some real property, and pay a set amount of money per month for life to the trust beneficiary.

Zero. ($0). No monthly payments happened. A month, three, six, a year passed. My friend was ultimately told the decedent’s debts exceeded the trust assets, and there were no funds left in the trust. Debts included substantial fees for financial advisors, the trustee, and lien(s?) on property my friend had no way of knowing even existed.

I said, “get a lawyer. Now!”

Nobody would take the case. My faith was totally ruined and I now do not have the belief that it is a good idea to appoint anyone as a financial advisor, least of all anyone working in banks as financial advisors or as trustees. Even with a scrupulous outside and unaffiliated CPA accountant, and regular financial reports by that objective third party CPA, there is no way to understand if a financial advisor or trustee is or will be faithful, because most heirs and beneficiaries don’t even know how to understand even simple financial reports. It seems to me that trusts as a means of conveying property after death just make trustees and lawyers wealthy at the expense of bereaved people who are the rightful heirs.

The sizeable estate my friend was to inherit was somehow mysteriously bled dry. I figure the best thing to do if you are wealthy is to give your money away while you are alive to those you wish would have it after your death. There is too much opportunity for uncheckeable theft, otherwise. Heirs and beneficiaries are not as financially savvy as financial advisors, and are vulnerable prey.