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
The Financial Planner Who Missed the Tax Benefits of Donating Appreciated Stock
A financial services guy told a lunch group that it made no difference whether people donated appreciated stock directly to a charity or sold it and donated the proceeds to charity. He claimed that, either way, “you still got the charitable deduction. ”While this is true, he completely ignored the capital gains tax that would be triggered when the person (rather than the charity) sold the appreciated stock. He could not comprehend that a direct donation of the appreciated stock to charity could save the donor from having to pay tax on that capital gain.
He was totally obsessed with the relatively minor charitable deduction on their tax return. I thought this was horrible advice and a disservice to anyone who followed his financial advice.
Most advisors are just monkeys
Most are just monkeys 🐒 on a string following a long set of guidelines. What you need is someone who understands math and questions every single guideline. Some of the guidelines don't past the test and end up costing their clients money every year.
This is a very small percentage that can actually do this. In fact my financial advisor is one of the majority monkeys. Occasionally I need to remind him to manage my account my way or he will start managing it like the rest of his clients. But he is a very good and smart person with a good heart.
I wouldn't trust a good percentage of them, find one that gives of the right vibe.
Not sure if I should trust financial advisor
I recently started seeing a financial advisor at First Command I met through a mutual family friend. The advisor is obviously very knowledgeable about retirement and investing, but I can't help but think the funds they are suggesting I invest in are more for their profit than my well-being.
They suggested a couple of accounts through Fidelity Advisor that have large percentages to invest in (some of the percentage goes to the advisor). The funds have a good history, but I can't tell if it's a smart move for me or if they are just trying to profit. Additionally, the advisor suggested a whole-life insurance plan.
They explained how they profit from it (basically, the cash value goes to them the first 2 years), but it still seems like a good plan to me.
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