indexfundfan @ indextown

JLP had this interesting post “Watch Out For This Loaded Question” yesterday that is worth a read. Apparently, insurance agents and financial advisors alike have their bag of tricks to lead a retiree into annuity products (read: huge commissions for the agent / financial advisors). The question to watch out for is this: “How much of this money can you afford to lose?”.

As the article notes,

… who in their right mind is going to say anything other than, “NONE OF IT!”??? I don’t like this question because it plays on the prospect’s fears. When people are scared, they make rash decisions. I can imagine a retiree having capital preservation as one of their top priorities. Asking a retiree, “How much of this nest egg (that you have spent your entire life building) can you afford to lose…” preys on that fear. It then places the advisor in the role as the white knight who is going to take care of them and lead them to the promised land. And, like I said before the “promised land” is usually reached via an annuity.

Does this question sound familiar to you in your encounters with commission-based FA/IFAs?

Random list of previous posts:

• August 1, 2006 -- Free computer backup program (4)
• February 12, 2008 -- More municipal reset bond auction failures? (6)
• November 1, 2007 -- Tools for tracking my portfolio (0)
• October 12, 2006 -- Morningstar Indexes Yearbook 2005 (0)
• March 14, 2008 -- Portfolio return for February 2008 (2)

This entry was posted on Thursday, January 4th, 2007 at 9:20 am and is filed under Investing, Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.