Being a Wealth Manager means I sometimes get to field very interesting questions from my clients in regards to things they hear on the radio, see on TV, or are told about by other investment/insurance advisors. Many of the questions I get end up being simply people abusing the 1st Amendment rights to freedom of speech and trying to pitch a product.

One of my favorite examples of this was a true story about a non-licensed advisor who published an investment newsletter. He made money from the sales of his newsletter rather than making a commission. Therefore, it was in his best interest to maximize the sales of his newsletter for profit. His brilliant marketing idea was to print two huge stacks of newsletters. One proclaiming the market was going to go down and the other proclaiming it was going to go up. Later after the market moved, he would send two new stacks to the people that got the correct prediction.  Once again with half of them predicting a drop and the other predicting a rise. After the second market move, he had a group of people who believed he had predicted the markets movement correctly twice and sold his newsletter to them.

That example is pretty extreme, but I hear similar things like this all the time. Another example was when my cousin called me because her friend was working as an advisor for an insurance company (I will not name it, but it was a BIG one) and wanted to hire her. He pitched her a story about 7702 plan that was better than a 401(k) as corporate retirement plans are too expensive and the average investor does terrible in them. So rather than reduce taxable income and get a company match, everyone should use this wonderful 7702 plan that provides tax free income in the future instead. What is a 7702 plan you ask?  7702 refers to an Internal Revenue Code that describes the taxable implications of life insurance contracts. That’s it…  It was a pitch to sell cash value life insurance and it was incredibly detailed! Lots of company sponsored and created marketing material about how 401(k)’s were bad and using cash value life insurance was better. Utter nonsense!!!  A 401(k) reduces taxable income for an immediate gain, the fees in 401(k) plans are going to be much lower than the monthly cost of insurance on a life insurance policy that only increases as you age, and the returns on a universal life/whole life policy are dictated mainly by interest rates. You can withdraw money tax free in the future from life insurance, but you can’t take all of it out or you will lapse the policy, which will immediately trigger taxes on all the gains. So you don’t get access to all the money you saved into the life insurance and you get trapped into it. And let’s not forget that most employers match what you put into your 401(k) plan, which is an instant 100% gain on your money. I know that this specific life insurance company doesn’t pitch their products like this anymore as the backlash was fairly large from the advisor community. The material they used was 100% accurate, but presented in a very misleading way that most likely hurt many investors.

My favorite are radio show hosts. I have many older clients who listen to radio shows from various investment people. What you have to realize is that they are paying for that airtime. They pay for their show. And if they are not licensed, they can say whatever they want to say under their 1st Amendment Rights! They can even direct people to a firm related to them, even though they themselves are not allowed to sell you anything!

So how do you know what is real and what isn’t? I would suggest doing background checks on the advisor you are talking to as well as the firm they are working with. If you look at the bottom of my website, there is a link to “FINRA Broker Check”. The link takes you directly to my profile and you can see if I am licensed, where I’m licensed, the company I am associated with, and if I have any customer complaints on my record. You can search any licensed advisor on there as well as their company. It gets trickier when you are working with someone who can only sell insurance.  You have to go to your state specific insurance board and verify the license. For example, in Colorado, you would go here https://www.colorado.gov/pacific/dora/node/100271. I would suggest using an internet search engine to find your specific state’s insurance board and then do a search on your agent. It is also important that if the person you’re working with has a title behind their name that you verify it is a real title. I’ve seen insurance agents make up titles on their business card like, “Retirement Income Specialist”.  That was something he just wrote on his card as there is no accreditation to become that. The title was totally fake! So internet search any title you see behind an advisors name. One of the most prestigious titles to have in my industry is CERTIFIED FINANCIAL PLANNER™ or CFP™. But even if you see that, you should still check your advisors history.

I hope you found this article useful and if you ever hear something you find questionable, or “too good to be true”, then please feel free to shoot me an e-mail or pick up the phone and call me! I look forward to hearing your questions!