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Guarding Your Wealth for Seniors
How Senior Citizens Can Hype-Proof Their Portfolio
Six ways senior
citizens can protect themselves from slick salespeople?
By Jeffrey D. Voudrie, CFP
April 21, 2006 - My recent article criticizing the
controversial equity-indexed annuity has generated a boatload of email.
But one email in particular caught my eye. And it wasn’t from being
flamed by irate insurance agents (I got plenty of those!), or emails
from thankful consumers, pleased the public is being warned about
equity-indexed annuities’ pitfalls.
(For
previous column on dangers of equity-indexed annuities -
click here.)
This special email was from a California lady who
had just attended a free dinner promoting equity-indexed annuities.
Being a legal assistant, she was able to sift through the fine print
found on annuity contracts and to actually understand it. She quickly
realized what the salesman presented didn’t line up with the contract.
When questioned, he told her that no, what he was saying was true.
After she got home, she contacted the insurance
company directly, and they confirmed her suspicions: the salesman was
misrepresenting the facts. The fine print was correct, not his sales
pitch. In her email to me, she asked a very important question: How can
investors protect themselves from being taken by slick salespeople?
● First of all, investors have to learn to
separate the message from the messenger. Financial salespeople are
highly trained to hit consumers’ hot-buttons and overcome their
objections. And let’s face it, some of them are pretty good at it! They
seem genuine and you want to trust them. But you’ve got to look past the
charisma and objectively examine the investment he’s pushing.
Many investors make the mistake of investing with
someone purely because they play golf together or attend the same
church. Again, focus on the message, not the messenger. Don’t assume
expertise just because you know someone.
● Second, don’t put your money into an investment
that you don’t understand. As Warren Buffet says, if you can’t explain
it to a child in a few sentences you probably shouldn’t buy it. Today’s
packaged products sound simple, but pages and pages of fine print often
reveal they are very complex. If you can’t read the fine print and fully
understand it, don’t buy it.
I can’t tell you how many times I’ve heard
investors say, “He said after a few years I could get my money out. But
he didn’t tell me I’d have to pay thousands in surrender charges to do
it!” When you sign the paperwork for an investment, you are saying that
you understand it, are aware of its risks and that you accept them.
Moreover, you generally are relieving the advisor of his/her liability
in the transaction, regardless of whether the sales pitch was accurate
or not.
● Third, never give in to pressure to make a
decision right away. If an investment is good today, it will be good
tomorrow and next month. You should never be forced to hurry a decision
to take advantage of a limited-time bonus or some other ‘act now’ offer.
These are just tactics to push investors into making a buying decision.
One of the most vulnerable times for investors is
when they move money from a company retirement program to an IRA. Most
feel pressure to make a decision right away. But even then, you can
always park your money in an IRA money market account and take your time
to make an informed investment decision.
● Fourth, do the research. If you aren’t willing
to take a few hours of your time to investigate an investment, you have
no business putting your money into it. The Internet makes this easy.
Look for negative information about a product. See if the reasons are
valid. Make sure you get all the information, not just what the advisor
tells you.
● Fifth, if you’re planning to put your money
into an investment type that’s new to you, move into it slowly. Don’t
jump in all at once. You can always add more to that type of investment
later.
● Last of all, whatever investment choice you
make, you won’t know if it’s the right one until further down the road.
So make sure you won’t have to pay a big surrender charge if you need to
change your mind later.
Don’t be fooled by the hype. If it sounds too good
to be true it probably is. Follow these steps and you will increase your
chance of success.
If you have a specific question or would like more
information give me a call toll-free at 1-877-827-1463 or go to
www.guardingyourwealth.com. You can also reach me by email at
jeff@guardingyourwealth.com.
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. Please
visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive.
Guarding Your Wealth for Seniors are
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 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 booking information, email e-mail
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