Three Financial Risks You Must Avoid – Control,
Access and Flexibility
These risks are difficult to place a dollar value
on…until you are affected
By Jeffrey D. Voudrie, CFP
April
18, 2008 - There are many financial risks that investors want to protect
themselves from: inflation risk, interest rate risk, market risk, and
more. But there are three risks that most investors don’t take into
account - and I believe not doing so can quickly get them into trouble.
I call them control risk, access risk and flexibility risk. Let me
explain.
When I refer to control risk, I’m talking about
your ability to exert control over your money. Since you are the one
that will have to reduce your standard of living if something happens to
your nest egg, it’s vital that you retain control over it.
The problem with annuities, life insurance and
other packaged products is that you immediately lose control over your
money. You are ceding control to someone else. They are the ones in the
position of power because they get to decide what is done with your
money.
They use contracts that specifically limit your
control and give it to them. Why would you ever want to surrender
control over the most important financial asset you will ever have? It
doesn’t make sense!
Access Risk
The second risk that people fail to think about is
access risk. Whose money is it? It’s YOUR money. If you own something,
shouldn’t you be able to access it any time you want? You own your home
and you can use it whenever you want. Imagine giving your home to
someone else where they control what happens to it and you can only
access it when THEY allow you to.
That doesn’t make any sense, yet that is exactly
what happens when you buy many of these packaged products.
There’s no way to know what life is going to be
like tomorrow. Few could have imagined the terrorist attack of 9/11. Few
expect to be in a car accident. No one thinks that they will have a
heart attack today, but there’s no way to know.
Let me tell you a true story that just happened. My
neighbor had some friends stop by yesterday. These ‘snowbirds’ were
driving their motor home from Arizona back to the Northeast.
As they were driving across the barren roads of
west Texas, they didn’t realize that there had been an auto accident up
ahead. The accident had happened on the other side of the Interstate,
but a highway patrolman had stopped traffic in their lane and a single
car had come to a complete stop. For some reason, the patrolman’s car
had no flashing lights to get their attention.
You probably know what happened. The speed limit
was 75 mph there and although the motor home wasn’t going that fast, it
takes a long time to get one stopped. He didn’t see the stopped car
until it was too late. He swerved around it…barely missing it…but the
truck he was towing clipped the back end of the stopped car, totaling
their truck.
But it gets worse…as he swerved around the stopped
car, the patrolman stepped out right in front of their path. The impact
threw him onto their windshield then dumped him onto the grassy median.
The officer ended up being air-lifted to the hospital.
This retired couple is still waiting to see if
charges are going to be brought against them. And they most likely will.
Their lives changed dramatically that instant…something they couldn’t
have foreseen. Imagine how you’d feel if that happened to you!
They could easily end up spending tens of thousands
of dollars in legal fees. This is just one of many true examples that
illustrate why free and complete access to your money is critical.
Flexibility Risk
The third risk is Flexibility Risk. This is closely
related to control and access risk. Basically, since it’s your money you
should have the flexibility to do whatever you want with it.
You should be able to make changes to the way that
it’s invested. You should be able to move it from one place to another
without having to pay a penalty. You should be able to pull it out and
use it to help a loved one or just to take that dream vacation. But
flexibility is just one more thing you lose when you buy a packaged
product.
These three risks are difficult to place a dollar
value on…until you are affected by them. Then they are priceless.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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April
18, 2008 - There are many financial risks that investors want to protect
themselves from: inflation risk, interest rate risk, market risk, and
more. But there are three risks that most investors don’t take into
account - and I believe not doing so can quickly get them into trouble.
I call them control risk, access risk and flexibility risk. Let me
explain.