This short video by the D.O.L. explains how your adviser may not be giving you the best advice, and it could make a HUGE difference in your retirement (and his)!
Why would my trusted adviser, my friend, not give me the best advice for me? He wouldn’t do that… would he? The D.O.L. thinks so.
Now I am NOT saying that all advisers would or are doing this, I am just pointing out that according to the D.O.L., it could happen and probably has happened. At least enough times they felt compelled to do a video and plan on making changes to the current rules of fiduciary standards. (2 page article by Bankrate.com explains here)
Why would your, or any adviser do that, you ask? Money! Simply stated, it is more money in their pocket and less in yours. We like to believe that all advice given is in our best interest, and in most cases, it is. Occasionally, however, due to personal needs, wants or interests, or possibly because of being able to offer only one product, an adviser may advise (read sell you) a ‘good’ product instead of the ‘best’.
This not only happens in our retirement accounts, but also in everything from apples to zebras! In other words, if the salesman only has one brand of apples, he is going to sell you those. Even if there are other brands that are fresher, cheaper, or healthier. He is making a sale based on what is best for him, not you.
Now of course, cheaper is not always the best. I believe in paying for quality. In apples, cars, life insurance or even zebras. So you have to weigh the pros and cons and make a choice that is best for you.
As a life insurance salesman, I could have just one company to offer you. I would be considered a “captive” agent, meaning I work for one insurance company and must sell only their policies. There are lot’s of captive agents and they do a great job; both for themselves and the company they represent. They believe that their product is the best available and would never even consider another company, and in some cases, it may even be best for the client, too. However, I believe it pays to look at the competitions products, benefits and pricing to see if I am truly getting what’s best for my clients.
Would you go to a car dealership if they only had one car model on the lot? and it was yellow polka-dot? No, of course not! But if you really wanted a car, you would have to buy it, wouldn’t you? So why only look at one option. Especially on your retirement accounts. It has been said that most people spend more time planning their vacations than they do on their retirement!
I have been a captive insurance agent before, and I did ok and helped a lot of people. I realized that more often than not, if I had done a little research and planning, I could have helped them even more.
When I meet with a new client, I explain that I get paid a commission, and since I have several companies to look at, we are going to focus on THEIR needs and budget and find what works best for their retirement goals. My commission is not an issue because I get paid about the same from each company. Once we get that understood, the client seems to relax knowing that I have their best interest in mind.
Now what does all this have to do with your retirement account and life insurance? I’ll tell you.
When you purchase a certain type of life insurance, part of the premiums go to pay the cost of insurance and the rest goes into a ‘retirement bucket’ that earns interest. This interest grows tax deferred and builds up a cash value that can be taken out as a loan against the death benefit. When you get ready to retire, the income is taken out tax-free, unlike most IRA’s and 401(k)’s, which you pay taxes on the income. Then when you die, your beneficiaries get all the money that’s left, also tax-free! Try that with a traditional retirement account.
There are charges and fees with a life insurance policy, but they are known upfront and are contractually guaranteed not to change, and my commission is paid by the insurance company, not by the client.
When you meet with any adviser, life insurance agent, or even a yellow polka-dot car salesman, ask for other options and do some research on your own to make sure what your’e buying is the best choice for you.
If you would like to discuss your options and see if this type if life insurance policy is right for you, contact me. I would be glad to review your current situation and look at the options to see if we have a better or additional solution for your retirement income needs.
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