Objective information about financial planning, investments, and retirement plans

Is Fear the Ultimate Financial Sales Tool?

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If you are like me you may have noticed a preponderance of TV and radio ads where fear is used to pitch various financial products.  If seems that these are overwhelmingly from providers of products such as annuities, insurance or other commissioned financial and investment products.   Recently I heard commercial for a variation of the insurance product called Be Your Own Banker.  Their pitch was the inevitability of a 50% loss in the stock market.  Really, come on.

Fear Is the Mindkiller

My personal pet peeve is that far too often these fear mongers seem to target seniors afraid of losing their nest eggs.

Should fear be a financial motivator? 

Ameriprise has been running a commercial asking folks if they would outlive their money in retirement.  A valid question and one in part based upon fear.

In fact many folks in their 50s or 60s looking for financial planning help as they approach retirement are asking this question.  Whether it’s fear-based or born out of a desire to be prepared it is a good lead-in to the financial planning process for folks in this age range.

On the other hand scaring people, especially seniors, into purchasing a financial product that may or may not be right for them strikes me as sleazy.

In a prior post on this blog, 5 Steps to a Lousy Retirement, I listed making financial decisions based on emotions as one of the steps to take on the road to a lousy retirement.  This especially true when you are being sold annuities or insurance products because so many of them come with onerous surrender charges meaning that it will cost you dearly to move your money elsewhere over the first 5-10 years of ownership.

Planning should precede the sale of financial products 

The logic, other than the desire to earn a sales commission, of pitching a financial product instead of a financial plan to a client escapes me.  In my world a financial planning strategy generally comes first, the implementation of that strategy including the use of appropriate financial products comes afterwards.

Inflation vs. investment loss 

Many of these fear-based product pitches cropped up in the wake of the financial crisis of 2008-09 and the corresponding drop in the stock market.

In my opinion, however, retirees should fear the impact of inflation on their purchasing power vs. losing money in the stock market.  Even a relatively benign 3% inflation rate will cut your purchasing power in half over a 24 year period.

Yes the stock market was hammered in 2008 and if you use the SD&P 500 as a benchmark the market gained very little during the decade 2000-2009.  However a diversified portfolio did reasonably well even during this “lost decade.”

Ask questions and do your homework  

Many successful financial sales types are very personable individuals.  In some cases the sales person might be your neighbor, a member of your church, or a fellow member of the local Rotary club.  This shouldn’t disqualify them as an advisor, however you should also be prepared to scrutinize their credentials and the products they may be trying to sell you with the same tough standards that you would hopefully apply to a stranger in the same situation.

As an example, with the Be Your Own Banker (or any of its variations) sales pitch that I mentioned at the outset, you need to dig very deep before writing a check for this type of insurance policy.  I went to the site and found much of the presentation confusing and found little or no information about the associated policy costs and expenses.

Whether an insurance policy, an annuity, or commissioned investment products you need to ask many, many questions of the agent/registered rep.

  • At the very least understand ALL associated fees, expenses, and restrictions on moving your money.
  • How does this individual get paid?
  • With an insurance related product how solid is the company behind the policy or annuity contract?  

Fear must be a very effective tool in selling financial products, otherwise we would not see so many fear-based product pitches.  Don’t fall for this type of sales pitch.  The only financial products that you should consider are those that are right for your situation, not those that you are scared into buying.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss  all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services. 

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Lessons the Financial Services Industry Could Learn from Visiting Lambeau Field

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My son and I attended the Green Bay Packers game against division rival the Detroit Lions this past Sunday at Green Bay’s Lambeau Field.  I’m glad his first NFL game was at Lambeau and that I was able to experience this with him.  If you are a football fan and have never been, a trip to Lambeau on game day is a must for your bucket list.  Here are some lessons that the financial services industry could learn from a trip to Lambeau Field.

The folks are friendly 

As you enter Green Bay you will be struck by the fact that the whole city is pretty much all about the game.  Many houses near the stadium turn their front lawns into parking lots, as did at least one gas station and local motel.  Some will let you tailgate right on their lawn and even use the restroom in their home.  We parked on the lawn of an elderly couple for $20.  The husband who was in a wheel chair directed us as to where to park even before taking our money.  In fact I had to find him to make sure that we paid him.  He didn’t seem the least bit worried about me stiffing him.

I can’t tell you how often a prospective client has told me that the reason they were leaving their financial advisor was that the advisor talked down to them.  I’ve never understood this and the only reasons that I can come up with here is either true hubris or that the advisor really doesn’t want the client to understand where they are putting their money.  In the latter case this could be because the investments are sub-par or there is some sort of fraud ocurring.

There are many good choices 

Wisconsin (I’m an ex-patriot Cheesehead) is all about good food and drink.  Like to tailgate, these folks are pros.  Want to buy your food, no problem.  Before you even get into the stadium there is a permanent bar in the parking lot, plus other choices like a McDonald’s food truck.  Once inside, the atrium is much like a shopping mall including a food court with a great selection of reasonably priced “game food.”

Sadly all too often employees have a menu of lousy 401(k) investment choices.  Clients of commissioned registered reps also are frequently offered financial advice that may be suitable for them but not totally focused on their best interests.  This may include being sold products such as high cost annuities.

The game day experience is fantastic

I’ve been a Packer fan since 1966 when they won the first Super Bowl.  A couple of weeks ago I was so fanatical during the debacle against the Bengals that my wife and dog left our family room.  I care who wins.

Being there with my son on Sunday transcended who won or lost.  The fact that we were able to get down to the bottom row of the stands and watch pre-game warm-ups was as much fun as the game.  Mike is a Communications major at Northern Illinois University where he also works for the Athletics department.  He was very interested in watching the media setting up for the game  as well as seeing the likes of Clay Matthews up close.

Sadly the financial services industry doesn’t always offer the investing public a great game-day experience when they are seeking financial advice.  A recent study by TIAA-CREF noted:

  • Forty-eight percent of Americans say it is hard to know which sources of financial advice can be trusted.
  • Thirty-seven percent of Americans say they don’t like talking to anyone about their finances.
  • Forty-six percent of Americans say that more than ever, they need a trusted place to go for financial advice.
  • Two-fifths of Americans think good financial advice costs more than they can afford.
  • One-third of Americans say they lack the time to get proper financial advice.
  • More than half (58 percent) of Americans say they would prefer to get financial advice from a single point of contact or location.

The financial services industry could learn a lot about service, the quality of the financial products and advice offered, and the need to serve clients for a reasonable fee by visiting Lambeau Field on game day.  It’s an experience like no other.

Please contact me at 847-506-9827 for a free 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.  

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Why Anthony Weiner Would be a Great Financial Services Spokesperson

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Anthony Weiner, NYC, May 2011 (Pre-"Weine...

Former New York Congressman and current New York City Mayoral candidate Anthony Weiner is at it again.  Mr. Weiner has admitted to another episode involving his texting photos of a certain part of the male anatomy to a woman who is not his wife.  While this lack of judgment, and apparently a moral compass, will certainly serve Mr. Weiner well in politics, I want to suggest that a major financial services company should consider hiring him as their spokesperson.  He is perfect for the job.

Mine’s bigger 

At the end of the day this is what financial services marketing is all about.  Our services are the best.  Our investment returns are better than the competition.  Our trading costs are lower, we offer more investment research.  Clearly given Mr. Weiner’s proclivity to show off his anatomy he is in fact implicitly saying mine’s bigger, mine’s the best.

Brand loyalty 

Whether it’s the E-Trade Baby or Tommy Lee Jones with Ameriprise, these spokespeople are trying to build brand loyalty for these companies.  Given that not once, but at least twice we’ve seen Mr. Weiner’s wife by his side as he addressed the media, I can’t imagine anyone engendering any greater brand loyalty.  I’ll leave it to others to ask “…what was she thinking?”

The ultimate Super Bowl Ad

Ok this one’s too easy, but I would think some shameless financial services firm would jump on the idea of teaming Mr. Weiner with NFL great Brett Favre in an ad.  Favre holds most of the NFL passing records and is a sure first ballot Hall of Fame inductee when he is eligible.  Favre, of course, allegedly texted photos of his male anatomy to female members of the New York Jets organization.  What a sensational tie-in!

Ignore the advertising hype

Clearly this will never happen and it probably shouldn’t.  My point is that while financial services commercials are often fun (I love the E-Trade Baby) they are designed to sell the advertiser’s products and services.  No matter who the firm is, I hope that nobody would actually go ahead and do business with any financial services firm based just upon an ad without doing their homework and due diligence.  Moreover find a financial advisor who is right for your unique needs.  Find a custodian who offers the services and investment vehicles that are right for you at a reasonable cost.

Please contact me at 847-506-9827 for a free 30-minute financial planning consultation and to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.   

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Friday Finance Links – February 22, 2013

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A few more inches of snow and some colder temperatures here in the Chicago area today.  Made it to the Chicago Auto Show last weekend, tomorrow my wife, daughter and I are heading to the Chicago Dog Show.  We own two, strictly looking.

Here are a few links to some great weekend financial reading.     

Personal Finance Blogs 

Kay shares Education tax credit form, already pushed into February, now causing filer confusion and more delays in processing at Don’t Mess With Taxes.

Miranda asks Is the YOLO (You Only Live Once) Mentality Dangerous for Your Finances? at Free From Broke.

Beverly links The Recent Die Hard Movie and Rental Car Insurance at Beverly Harzog.com. 

Posts from Fellow NAPFA Members 

Cathy Curtis asks Do You Need A Prenup? at Figuide.com.

Mathew J. Illian is upset about Bailing Out The Boneheads at Figuide.com.    

Other financial articles from around the web

Jen Wieczner shares Why your boss is dumping your wife at marketwatch.com.

Mark Miller tells us Why Boomer Retirement Balance Sheets Are a Mess at morningstar.com.

Laura Pereyra offers 5 Ways to Deal with Financial Aid Uncertainty as the Fiscal Cliff Talks Continue at usnews.com.

In case you missed it here is my latest post for the US News Smarter Investor Blog Financial Services Ads: Look Beyond the Hype. 

Here’s wishing everyone a great weekend.

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