If you invest with an insurance firm or big bank they may be preying on you. Because they know how. Executives at financial services firms know consumers are never rational. Instead, they are nearly perfectly, predictably, irrational.
You should be familiar with the investor return gap. It’s the difference between what investORs get and what the investMENT makes. Investors buy when prices are high and sell when prices are low. And this causes them to give up half of their potential returns!
For example, investors in the retail share class of the Vanguard S&P 500 fund made 2.9% per year (ten years ending Q3 2017). But the fund itself made 7.3%.
For every seller there is a buyer and every buyer a seller. It's zero-sum. Your loss is another's profit. The big banks and insurance companies have developed strategies for capturing the profit.
It means you need an advocate. Not only to protect you from yourself. But to protect you from the big banks and insurance companies.
What really gets my goat is when investors get misled. They say they put your interests first, but clearly, they don't. Which is why I am writing this.
A recent article in the New York Times exemplifies how TIAA does this to investors. TIAA claims to have a "nonprofit heritage," which may lead you to believe they are nonprofit. I know what you may be thinking. You may be a teacher or professor who has been with TIAA for many years, familiar with Carnegie Mellon.
So, let’s cut through this confusion.
Congress revoked TIAA's nonprofit status in 1997. Then TIAA ramped up its sales efforts after it hired a Merrill Lynch executive in 2002. TIAA management assigned outsize sales quotas to representatives (tied to bonuses). They played up customers' fears of not making money. Former employees say their motto is "if they cry, they buy." They even use a .org website (reserved for nonprofits).
Companies must make money. But we aren’t fans of firms lying about it.
Ladies and gentlemen, this is the tip of the iceberg. Just this week more shocking news came out about Wells Fargo. Remember Bank of America?
We are our clients’ advocates, navigating the financial services confusopoly. The first step is to understand your attitude toward risk.
The next step is to allocate risk, then to educate on expected risk. Investors fail when the unexpected happens. Let's get rid of the unexpected (as much as possible).
Our process for working with clients is simple. First, we schedule a 30-minute talk. When we agree there may be a fit between your needs and our services, we set up a two-meeting process. We can do this for a flat fee of $825. The fee is often rebated for clients retaining us for ongoing services.
The investment, tax, and legal environment changes. And we have planners, an accountant, and attorney, on staff.
Do you need an advocate?