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The "Financial Planning Blueprint" Blog

  • Writer's pictureJason Flurry, CFP

Do as I say not as I do

Updated: Nov 2, 2018

The secret investment strategy banks don’t share with their customers and why you may want to look more closely at the financial advice you’ve been given

I’ve been a financial advisor for a long time and as a result, I’ve seen a lot of things that make me scratch my head. Coming into the business as a commission-based broker I always heard, ”Put the client first.” Naturally that sounds good when you hear people talk about it, but I leaned after some time in the trenches that it doesn’t actually play out so well in the brokerage firms’ business model. In their design the house always wins and the reps get a portion of the commissions charged, but the clients are last in line to make money, if they make any money at all.

So how can a client ever be “first” in that scenario? It’s clear they can’t – but that doesn’t change the fact that they should be.

Whose best interest is at stake here? I see this kind of hypocrisy all the time in the financial services business. And it has me asking the question of “who’s best interest is at stake” with each case I review. Most of the time I see that the financial media and the financial services world feeds the masses the same old “save for retirement and save for college” song and dance, but the methods they use are often more geared to support their future goals than those of the people seeking and paying for the advice.

Take, for instance, the old school, cash value life insurance policy. It has many wonderful features that can include guarantees against loss, dependable dividends, tax deferred accumulation of wealth, tax free withdrawals and a tax free death benefit you can’t outlive. There are some costs up front to purchase a policy like this, of course, and it can be much higher than other alternative investments in the beginning, but over time consider the costs of a plan like this vs. having money in mutual funds in your retirement account. Plus, if structured properly, a cash value life insurance plan can eliminate 80% of the normal commissions the agent normally gets so you can begin to accumulate money much faster than most people realize.

The fees you pay behind the scenes in your mutual funds every year without any guarantees and all the risks associated with investing in the stock markets add up to a lot over time. That makes them the far more “valuable” investment to the one recommending the approach – but not necessarily to you as the one owning it.

How often do you hear advisors talk about that? Never, right?

Why do you think that is?

Banks are just as guilty Here’s an example that will show you just how mainstream this type of thinking really is. Banks tell us: "Life insurance is bad...brokerage accounts are good." But, what do banks do with their own money? You guessed it – purchase cash value life insurance policies. In fact, a recent survey the FDIC did of banks showed that 53.4% of them held some type of bank owned life insurance with an average premium of about $2 million per case on newly issued policies. Some of the bigger publicly traded banks, like Bank of America for example, show in their annual reports that the cash value they have in their bank owned life insurance policies is the #1 largest asset they own!

What do you think they know about managing their own money that they aren’t sharing with their clients? Or is it just better for their business to keep singing the same song of “invest for the long haul and max out your retirement accounts every year.” What does that do for them?

If you said “build up a long-term business model that pays them each year regardless of how well or how poorly you do personally,” you’d be right. And when your money is in a retirement account, you can’t touch it until you’re almost 60. That gives them a lot of billing periods to work with and plenty of money to reinforce the dogma of “think long term.”

I want you to do better than that. So, while investing in mutual funds and paying fees are not inherently bad, there are other investments worthy of consideration that can provide additional benefits with far less costs to you over time. You owe it to yourself to explore those options instead of believing everything you hear and read online. You’re smarter than that.

In search of the truth Take some time and research more about this rarely mentioned secret bank keep for themselves, and then ask yourself, what am I missing by following the masses and the so called “experts” who only recommend “buying term and investing the difference?” Also look closely at how the financial media on TV or on the radio recommends buying this or that and ask yourself “whose best interest is involved with those recommendations?” What is their motivation for telling you this or that? Are they selling programs, books, or ad space for their show or network or really providing you valuable financial advice?

Are they speaking as “financial personalities” or representatives of the mainstream financial establishment to reinforce the mentality that made them rich and keeps them rich? OR are they truly dedicated and passionate about seeing people improve their lives and genuinely involved in helping people manage their financial lives efficiently and intelligently on a personal level?

A little education goes a long way – but you won’t get what you really need from the mainstream financial media or investment community. That’s why I’m here – to look out for your best interest and keep you ahead of the rest when it comes to approaching your future with confidence and certainty.

Let me know if you’d like a real glimpse into what you’re doing with your investments versus maybe what you ought to be doing. I offer a free review session that will give you the perspective you need to make better, more informed decisions about how to achieve the life you’ve always dreamed of. If you have any concerns about the advice you’ve been given, this may be the perfect time to do a review like that.

The passing of time won’t help you get any closer to your goals if you’re headed the wrong way. Take action and get things back on the right track today. Your current advisors won’t be happy about it, but since your needs are supposed to come first, I’m sure they’ll understand.

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