Learning From OthersÂ’ Mistakes
“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 our website, www. guardingyourwealth. com to read past articles in our archive.
(PRWEB) August 11, 2005
When it comes to investing your money, it costs a lot less to learn from mistakes others have made than repeating the same mistakes yourself. This week, I will share one readerÂ’s horror story and their mistakes so you can avoid these costly pitfalls.
This is a true story. Just a few days ago, I received a call from “Mrs. Smith” from Texas. Her husband invested virtually all of their retirement nest egg into a variable annuity on the advice of an advisor he had just met. That was in early 2000.
Today, the $800,000 he invested is only worth $100,000. The nest egg that they planned on using to comfortably retire has vanished. It’s gone. And at 60 years of age, they have little chance of rebuilding it. Their lives are changed forever—all because they made some basic mistakes.
The first step in protecting yourself from a similar fate is to recognize that it can happen to you. Their story is not unique. ItÂ’s easy to think that we are smarter, that thereÂ’s no way we would make a similar mistake, but thatÂ’s not true.
These are very intelligent people -- people who have advanced educational degrees and high-paying jobs. Just because you are an expert in one field doesnÂ’t mean you canÂ’t be taken advantage of in the financial services industry.
In fact, brokers and advisors are trained on what to say and even what body language to use to gain your confidence. It’s called ‘mirroring’. We are more apt to invest with someone who is like us, so some advisors mirror your personality, actions and attitudes to dramatically increase their sales. You think I’m kidding? If so, reread this first step because it applies to you!
The second step in reducing your chances of making a bad investment is to take your time. If an advisor says “you have to act now or you will miss” an opportunity, then miss it! If you are serious about investing the money it’s taken you a lifetime to accumulate, do your homework first. Mr. Smith made his fateful decision to invest only 30 minutes after meeting the advisor!
The next big mistake that Mr. Smith made was that he put 100% of his money into a single investment. Never, ever, put 100% of your money in any investment—even if it is directly guaranteed by the government. Even grandma knows that, yet people do it every day. If an advisor recommends you invest 100% of your money into any single investment, run out the door and never look back.
I received another email this week from someone in Ohio. An ‘Estate Planner’ had just recommended that her mother invest $1,200,000 into an Equity-Indexed Annuity. That’s a great investment…for the agent who would make over $100,000 on the deal! Her 70 year old mother was a recent widow, being asked to invest every penny into a 10-15 year investment. This is insanity, yet it is perfectly legal!
Most retirees want an advisor who recommends good investments, closely monitors those investments and takes action when necessary to harvest profits or to stem losses. Instead, most people end up working with a salesperson looking for a commission.
Lastly, Mr. Smith failed to take action while the value of his investment dropped 87.5%. If the value of your account drops by more then 10%, act! DonÂ’t believe anything an advisor who has lost that much of your money has to say.
Unfortunately, Mr. Smith has little recourse. The paperwork he signed essentially released the firm and the advisor from responsibility. By the way, Mr. Smith signed paperwork that wasnÂ’t even filled out! Of course he didnÂ’t read it, either. Never sign something that you havenÂ’t taken home, read and then re-read again. Never sign something that is not completely filled out.
Countless people have lost fortunes by following the advice of people who seemed so friendly and trustworthy. DonÂ’t be one of them. IÂ’m ashamed of the practices used by many of my colleagues in the financial services industry. ItÂ’s time the industry changed, removed all the conflicts of interest and began serving its clients. Until then, be on your guard!
Have a financial question? Send me an email and I’ll personally respond, free of charge. Go to www. guardingyourwealth. com and click on ‘Ask Jeff’.
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 jeff@guardingyourwealth. com.
Related Articles can be found at www. guardingyourwealth. com under the Guarding Your Wealth Article Archive.
Contact:
Jeff Voudrie
877-827-1463
Jeff@guardingyourwealth. com
###
