I used to think I was pretty cool. I had a financial advisor. It seemed weird to say because I thought only rich people had them. I would ask him about advice for where to put my money in my 401k. He would direct me where my private Roth IRA allocations were. Eventually, when I rolled my 401k into an IRA he managed that too. When our son was born he created a 529 for him and set up that plan’s allocation. It just made sense.
The problem is “you don’t know what you don’t know.” I didn’t know how much he was screwing me over.
After getting our personal finances, PF, in order (paying off consumer debt and having an emergency fund) we started taking aim at retirement. I started focusing on that part of PF by reading about index funds, a great low-cost option for people. I listened to the Scott Alan Turner Show, and he helped me realize that my advisor was not acting in my best interest. I was in funds that had high fees up to 2.5%. My advisor was not a fiduciary.
I was hesitant at first. I had known this guy since high school, 11 years! I decided to test the waters. I asked him about life insurance.
Life insurance isn’t a complicated topic. The average person needs a 20 year term policy for whatever would cover their family in the event of passing. The catch is whole life. This is a despicable product.
Basically, whole life is 10 times more expense per year, runs for the same amount of time BUT at the end if you are still living you get some of that money back. The insurer essentially creates a side savings account with terrible returns. The even bigger slap in the face is if you do die during that 20 years your family only gets the face value of the policy and not that extra you were paying in.
Naturally, he tried to sell me a whole life policy.
I was upset. I didn’t know what to do. I tried to convince him to move my assets from the high cost brokerage to Vanguard. He was ok with this but he started talking about ETFs I wasn’t comfortable with instead of what I wanted which were index funds.
I ended up breaking ties with him and going to Vanguard on my own. I feel much better about my finances. Everything was falling into place.
Just as I was celebrating he gave me two last gifts. I found out that of the two Wisconsin 529s my son could be in, he was in the most expensive one. On top of that he sold my parents two whole life policies.
Ultimately, I can’t blame him, he was doing exactly what his company wanted him to do and makes him the most money. I should have been a better consumer by knowing what was going on with my money instead of blind trust.
I hope this helps wake you up to go take a deep dive into what others are doing on your behalf.
Ignorance is not bliss.
Have you been screwed over by someone you thought was acting in your best interest? Do you have a financial advisor? Are they a fiduciary?