Warning about some "financial advisors", "financial planners", etc
I was approached by a "financial advisor" who offered free financial advice. This planner was a friend of a friend, so I agreed but told them straight off the bat that I was not looking to hire a financial planner. They said that was fine, and that the advice would certainly be free because I’m a friend of a friend.
This is where I made my first mistake. After a few meetings, this advisor gave me a "financial plan" that included paying for term life insurance AND whole life insurance AND disability insurance (all policies under the company they work for). These would come out to $4,700/year when my salary is only in the $80-90k range. Not to even mention that I am 22 years old with no dependents and have no need for life insurance. This "financial plan" also didn’t include rent, mortgage payments, car payments, or anything else I might need to pay in the future.
I can understand being advised to get disability insurance, but this financial advisor knew that I had not even signed up for my company’s disability insurance and so would not be able to make an informed decision on it. I told this person "no," but they tried to convince me I was making a bad choice. They told me that whole life insurance was a good investment, even better than investing in some index fund, and generally made it sound like this would be the worst financial decision of my life.
I asked my friend about this, and it turns out his mother also sells life insurance. The difference is that she’s ethical and only sells whole life insurance to people who actually need it (i.e., not people in their early 20s who have no health issues and no dependents). I found out that whole life insurance is not an investment, and if it is, then it’s a pretty lousy one. I found out that I probably don’t need two different life insurance policies at the age of 22 with no dependents.
My point is, there are certain people passing themselves off as "financial planners," "financial advisors," or "financial whatever" who tell you that they want to make sure you’re financially secure and would only want to advise you to do things that are in your best interests. These people are snakes, but somehow, they are able to legitimize themselves behind a big company. I’ve heard that a lot of them target younger people and use fear to convince them to buy a bunch of insurance they don’t need.
Just be careful, fellas, and do your own research.
Related Horror Stories
Fee Overload: How I Was Sold a Costly Pension Plan with Hidden High Fees and Poor Performance
I went to see one about setting up a private pension because I don't get one through my employer (employed through an offshore company). Got charged about 150 quid for them to go away and "research" some options for me (probably very little research to be done; they already have a standard set of funds that they use through Openwork). For the first year they wanted 35% of my contributions.
The fund that they "found" for me (something Graphene, can't remember the name of it and I'm not at home to check) consisted of several individual funds to apparently lessen the risk of a single fund manager going to shit. In total the funds consisted of about 70% UK equities (why?), had rubbish past performance when compared to a global index tracker and would've cost me well over 2 or 3% per year (can't remember the exact number sorry), plus about 1% per year to the financial advisor for "management" after the initial 35% for the first year.
Playing it too safe
Can a financial advisor give the wrong advice? Yes, especially towards young people who are starting which was my case, they went way too safe and too conservative to the point that my savings in my retirement account were gaining peanuts barely over 2% a year. I switched banks and never looked back.
Either too safe or too risky. You probably hear tons of stories, especially wasting many years of young people who could have put those crucial early years to better use under a better advisor.
Leave the clowns at the circus
Put it this way, have you ever been to a circus? You have! Well, remember those people who made you laugh? Finance advisers can also do this. But they can also make you cry. Here’s a funny story—true as well.
We had a clown, visited us as they do for many years, charging us fees, etc. Also, fees that were not revealed to us, which we discovered later. Well, after 13 years of having him sponge off us, we realized he had F.C.ED us, big style. He said the investments were not taxable as they were a specific type of investment.
Well, we realized these were taxable when we questioned him, asking, "Why did you set these investments if they are taxable?" He ran away and left us with a tax bill of 13 years, plus interest.
People will say, "Why did you not make your own enquiries into what is taxable and what is not?" Well, the answer to that is because we were paying a professional.
Well, it cost us dearly, so make sure it doesn’t happen to you. Leave the clowns in the circus!
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