Friday, July 20, 2007

12 things your agent/broker/banker/money-manager won’t tell you.

1. “We have FEES and COSTS for everything. Most are not necessary.” For instance, your life insurance policy is probably one with a higher premium than necessary. Compare the cost of $200,000 benefit for a 50 year old in good health--$356 versus $481 per year. [] It does not cost $50 to buy 200 shares of IBM. You can buy them for $0. [] And why should your broker charge you $160 when your account is inactive? [] Why are you paying 50 cents to deposit a check? Banks should pay you to deposit checks. [] Is your 401k money manager really worth 1.54% of your assets each year? And looses money too? Your employer should buy a retirement plan that costs you $0.30% or less with no kickbacks.

2. “We offer products that are best for our firm, not for you. We don’t show you all the fees and commissions and financial kickbacks and perks we earn when we sell you our products. Our products are the “best” available because we sell them. We are the best in the industry because our marketing image says we are.” One pension plan provider charges 2.75% a year for their tax-deferred annuity. It has 9 years of surrender charges so you can’t transfer your money if you change employers. It charges another $30 a year for ‘recordkeeping.’ Its mutual funds are among the poorest performers. [] One brokerage firm steered customers into their own funds because they have a higher broker payout. [] Your agent doesn’t sell SBLI, your broker doesn’t sell Vanguard, your banker does offer really free checking, and your money manager doesn’t price your funds at cost—0.1% or less.

3. “We will discuss your financial needs with half truths.” You are told you need $1,000,000 of life insurance but the policy type that your agent picks is the most expensive in the world. Even if you agree you need $1 million, you pay more for permanent, 30 year guarantee term or “return of premium” term than just term. [] You want a guaranteed income for the rest of your life but your broker doesn’t mention that the annuity payments loose half their value in 24 years. [] You want to save for college but your banker doesn’t mention that 529 plans are NOT taxed like the custodial account just opened for your child. You want to save for retirement but your broker put you in two 'hot' funds.

4. “We don’t tell you about other alternatives. We don’t get paid to tell you there are less expensive alternative ways to solve your problems.” You can buy a FREE checking account from your credit union. The CDs pay more, the checking costs less and the loans are cheaper. You don’t need an ATM on every corner. [] You can defer taxation on your account earnings by buying and holding stocks or tax-managed funds. [] You can save on liability insurance by buying only what you need. [] Wealthy people buy “assets that grow by themselves” so they can self-insure and self-fund their needs. [] Consumer Reports reviewed 47 LTC policies and concluded that “for most people, long-term-care insurance is too risky and too expensive.”

5. “We don’t explain how you can reach your goals in the least costly way.” Banks offer life insurance to cover your loan because you want to get the loan. They don’t explain that your existing term policy will cover the loan. [] You can build a much larger retirement nest egg by investing in stock mutual funds costing .07% vs. 1.3%. Compounding magnifies the difference—20% more money over time. [] When new employees sign up for the retirement plan they are encouraged to pick the ‘safest’ option—treasury bonds. Stocks are more likely to grow in value over the long term than treasuries.

6. “Our products must be ‘sold not bought. We use half-truths in order to contrive an ‘urgent financial need’ that you can solve only by buying our products.” One firm charged a 91-year-old “client” more than $35,000 for four trades over two years, at approximately $8,800 per trade. [] The largest annuity seller is accused of misleading policyholders regarding bonus payments promised on annuity products. [] Life insurance is not the foundation of every financial plan—you are more likely to run out of money than die in the 21st Century.

7. “We believe the hype of our industry: We give good financial advice that you can’t get anywhere else.” There are no classes in our high schools called Financial Health Class. You can’t easily find out the “tricks of the trade” used to sell you the products created to pay high fees to sellers. Young single people don’t need life insurance. They need to invest 10% of their income at an early age to reach their goals and become wealthy. [] If brokerage firms actually followed their own stock selection advice, they would have negative returns. The average return for the top 10 brokerage firms was minus 2.26% from 1997-2001! Most were negative (Investars). 88% of managed mutual funds earn less than the market. You are better off making your own mistakes.

8. “We are experts at figuring out what your “hot buttons” are and using them to get you to buy our products. We exploit the fact that everyone wants to buy the next Google stock or become a millionaire overnight buying and selling real estate or gold. We exploit the fact that seniors fear losing money and want to earn 10% on their money with a completely guaranteed investment.” Finding the next Google is like finding a dime in a football field on the first try. The average equity investor earned a paltry 2.57% annually; compared to inflation of 3.14% and the 12.22% the S & P 500 index earned annually, 1984-2002. [] You pay for guarantees by earning less and not keeping up with inflation. So even though you don’t lose money, inflation reduces your money’s buying power. Putting your money into different risky investments reduces your chances of losing money and increases your chance of beating inflation. The stock market returns about 11% over time. See chart:

9. “We don’t sell products from companies that don’t pay a commission—so you never obtain the least-cost product. We only sell products with commissions and fees and kickback incentives and “soft dollar” reimbursements.” When was the last time your broker offered the mutual funds with the highest returns over a 20-year period? Vanguard Primecap--13.6% over 20 years--#1 in large company growth stock funds. Vanguard Health--17.4% over 20 years--#1 in Sector funds. Vanguard Energy--16.4% over 20 years--#2 in Sector funds. [] Did your agent call to tell you that life insurance rates are dropping so you should apply? [] Did your auto agent mention that rates have fallen? [] Did your banker mention that internet banking is FREE? [] Where do you find the highest CD rates?

10. “We charge you fees whether we give good service, good rates, good returns, or good benefits.” One money manager charges 1.5% for the same exact fund that charges .07%. With $250,000 invested, you will give up about $700,000 (2,723,138 vs. 2,022,979 over 20 years of compounding at market rates). Only 12% of managers can beat their benchmarks over long periods of time. You don’t get a refund if your manager can’t beat the index. [] You can’t get a refund if your CD or annuity renews at a lower rate. [] You can’t get a refund if we mess up your trustee to trustee transfer. You don’t receive a “better” death benefit check for $200,000 when your loved one dies. [] Many banks hit customers for fees they didn’t tell them about. Only the lawyers knew.

11. “When things go wrong, we treat you like you’re the enemy.” All brokerage firms disallow you to sue for bad service—you must use their arbiter and settle for the decision. One firm has the worst call response service in the industry. [] One company pressured outside engineers to prepare reports concluding that damage was caused by water rather than by wind. They just denied all of them in the same geographic area. [] Another insurer dropped coverage and stopped signing new policies in coastal areas of 9 states. [] Some long term care insurers aren’t paying claims.

12. “We don’t care if you have been a loyal customer. We buy and sell customer accounts anytime we can make more money from it.” In the last few years, hundreds of customers have had their accounts transferred out of area. For instance, John Hancock’s president sold the company to Manulife [Canada], Fireman’s Fund was sold to Allianz [Germany], Household Finance went to HSBC [Hong Kong], and Sage Life went to Old Mutual [S. Africa]. Brown & Co and HarrisDirect went to E*Trade. Golden West Financial went to Wachovia. MBNA and Fleet Bank went to Bank of America. A complete list is available at More consolidation is expected: HSBC, Rydex, Gateway Investment, GAMCO Investors, Julius Baer Investment, UBS AG. Your accounts could be next. You can do it yourself and save.

"Investors should purchase stocks [financial services] like they purchase groceries—not like they purchase perfume…” Benjamin Graham

See Today’s Savings Ideas at
© 2007 IAN,llc

Thursday, July 19, 2007

Ways to build your Wealth Reserve

Mary just started her first job
Mary is the daughter of one of our members in FL. Congratulations! She is earning more than she has ever earned and asked how to begin her financial life. She contributes to her company 401k. Mary read our FREE Guide and set her goals as far as she knows them—buy a house and a better car. Mary wants to buy a 2 bedroom for $200,000 in Pensacola . She can share with someone. She will need $40,000 down to avoid mortgage insurance for the bank. She has $7,000 saved. She needs to invest $500 a month for 4 years: check using this calculator: She can get her parents to help with the closing costs. Her mortgage would be about $1000 a month. A share would rent for $700 to $800. She used our Guide to Buying a Mortgage to understand the process: Then she can buy a luxury car for 40% off using The Insider’s Guide to Vehicle Purchases: Congrats!! Mary will grow her Wealth Reserve instead of paying rent (growing someone elses).

Fred wanted to avoid an increase in his homeowner’s policy
Our member, Fred of MA, got a rate hike notice from his insurer. He asked his agent why and was told that all homes in his area were at higher risk. Fred thought his 15 years of no claims would mean no increases. His home was not on the shore or near a river. He asked his neighbor if he had received a similar notice. No one had. Fred checked our Guide. He realized that he had nothing to loose by shopping. He went online for 3 quotes. He found one for $85 less than his old premium before the increase. He will save over $2,500 with one hour’s work.

Ruth was offered an annuity and declined
Member Ruth of FL was offered an annuity by her advisor using the phrase: “Annuities are a woman’s lifeline in retirement.” Her advisor said that annuities provide a predictable income for a more secure retirement. He said annuities appeal to women because women live seven years longer than men, are concerned about adequate income, and like annuity guarantee that they can’t outlive payments. Ruth read our Guide which helped her decide to use a low-fee balanced fund instead. Ruth learned annuities cost more and earn less than she could on her own, have reduced payouts to women since they live longer, payout amounts lose half their value over time, and charge for guarantees that are never used by 94% of contract owners. Plan your retirement spending:

Lower your profile with insurer and save
If you are a homeowner who files frequent insurance claims, has bad credit or even calls your agent to ask about possible coverage for a broken window, you may be assigning yourself to a new category when your policy renews. These actions can be noted in the computer CLUE file. Insurers use it in their risk models. You could face higher premiums or outright cancellation of coverage. In some cases, the history of your home can put your profile in a higher risk group. Or if you are buying a home with a “rap sheet” you may not be able to afford the coverage. Members lower their premiums by knowing our Insider’s “tricks of the trade:”

BEWARE: Hot “deal” in life insurance
One of the hottest life insurance sales strategies being used today is harvesting home equity to over-fund a life insurance policy up to the MEC guidelines. The agent takes the equity in your home and deposits it in a policy they call “investment-grade life insurance.” The commissions are HUGE. They claim it can be used as a college funding vehicle, a non-regulated retirement plan or a family bank while providing families the valuable protection they need. You surrender the tax-deductibility of your home equity loan payments. They tell you this is a good investment because you earn more than the loan costs. They may claim that “the actual cost of the life insurance protection inside of a cash-value life insurance policy is much cheaper than buying a separate term insurance policy.” The cost is hidden not less—all 50 year olds of similar health pay the same COI, just over a longer time period. They cite studies that say most investors earn less than 4% while insurance earns above 5% tax-deferred and has loans. Some even claim you can pay increasing mortgage payments from policy loans. Every reputable advisor will tell you that insurance is not an investment. Members have learned to avoid these tactics by learning to buy only what they need with our Guide:

“Show me state” says you need it more than we do
Missouri is exempting most Social Security benefits from state income taxes, starting this year and being phased in through 2012. The Gov called the tax "an unjust cut on Missourians' hard earned income." Missouri was one of 15 states that collects income tax on Social Security benefits.

You CAN have enough income in retirement
When you go on vacation, do you plan how far you will drive or fly? Do you compare prices between different tours or airlines? Do you make a reservation for each night of your stay? Do you take enough cash to pay for gas or meals? Do you change hotels/motels when you find out the price went up? Planning for your retirement is done exactly the same way. First, pretend you are in retirement. What are your actual income and expenses for the first month, first year? Social Security income can be estimated from the site: Ask your employer for a preliminary statement if you have a pension coming. Use our Insider’s Guide to Retirement Spending to complete your estimate:

Communism hits home run . . . on Republican Field!
The Bush Supreme Court has ruled that you can’t bargain with retailers for a lower price anymore. Companies can now dictate prices to your bargain stores. No more 15% off sales. It means higher prices will be charged than would otherwise be the case. More of us will have to buy “off the truck.” It is back to pre-anti-trust years when manufacturers fixed prices and retaliated against discounters. Today the Court ruled against this 100 year old law: It is “illegal under §1 of the Sherman Act for a manufacturer and its distributor to agree on the minimum price the distributor can charge for the manufacturer’s goods.” The Court dissenters said: “The Sherman Act seeks to maintain a marketplace free of anticompetitive practices, in particular those enforced by agreement among private firms.” When “fair trade” laws were studied in 1975, Justice found “that minimum resale price maintenance had raised prices by 19% to 27%.” Also, the White House has indicated that President Bush will veto any attempt to establish gasoline price gouging legislation. The oil trust can set prices anywhere anytime now and even Congress can do nothing. Read (final paragraph) and weep! Give your opinion at

Almost all of your estate could be designated OUTSIDE your will
Our Insider just completed a NEW Insider’s Guide: A Guide for Survivors. He reports that most people leave their assets outside their will. Most assets are passed to survivors by beneficiary or right of survivorship rules, NOT according to a will. Check that custodians still have your current designations and don’t name your estate. IRAs can be extended. Joint and POD accounts and IRAs, annuities and pensions will go to the person designated when the accounts were opened. Your will may be changed in the last month of your death, but that won’t mean anything for the bulk of your estate. Members retain all their beneficiary designation documents in their 3-ring “Survivor manual.” See our Guide below.

A NEW Insider’s Guide: A Guide for Survivors
You may be asked to serve as executor of your family member’s estate. You need time to grieve the loss. You need time to pick up the pieces. Now you can . . .
Create your future life.
You will be able to handle ’executor’ details of the estate, and
You will be able to manage the money, and
You will be able to make a new life.
The memories live on. You will survive with the assurance that you can take control of your financial life. You can find your own way. Our Insider shares his experience first hand:

Who owns your accounts now?
Mayflower National Life to Assurant Inc
Rydex Investments to Security Benefit Group
Investors Financial Services to STATE STREET
Option Care to WALGREEN

Questions or comments to

Monday, July 2, 2007

Savings ideas for June 24

A NEW Insider’s Guide: A Guide for Survivors
You may be asked to serve as executor of your family member’s estate. You need time to grieve the loss. You need time to pick up the pieces. Now you can . . .
Create your future life.
You will be able to handle ’executor’ details of the estate, and
You will be able to manage the money, and
You will be able to make a new life.
The memories live on. You will survive with the assurance that you can take control of your financial life. You can find your own way. Our Insider shares his experience first hand:

Jean saved $545 on her car insurance
Member Jean of PA got our email and asked if it was worth switching car insurers. She was told by her agent that her rate was the lowest available in her area. However, what her agent didn’t say was that he only represented 24 companies. What about the others? Jean hated to change agents. She did use our Guide to shop and buy only what she needed from a telephone agent. She saved $545 for a 6-month policy. She also has better coverage because she increased the liability to $300,000. $1090 per year savings means Jean will be able to buy a home sooner. She may have $22,000 for the down payment in 10 years. Yes, it is worth it:

Floridians get refund
United Property & Casualty customers who were overcharged last year were ordered to be refunded $43,249,714 recently by the state. Don’t wait to be overcharged. When your homeowners' insurance rate increases, shop for a lower rate. Chances are you will find it, especially when you know what NOT to buy using our Guide:

Most customers who shop, switch—for price or service reasons
The average auto insurance customer gathers three competitive quotes while shopping for a new provider, and while the majority of insured shoppers remain with their current carrier, 33 percent will switch, according to the J.D. Power and Associates 2007 Insurance Shopping Study(SM) released June 27, 2007 . The study finds that while 33 percent of consumers who shop because of price ultimately switch, nearly 75 percent of consumers who shop because they have experienced poor customer service switch carriers. Members shop every 2 years to take advantage of insurer’s marketing changes. Use our Guide to buy only what you need:

GMAC lowering rates—Time to go shopping!
GMAC aims to be one of the top five U.S. auto insurers in the next five to eight years, chief executive Gary Kusumi said recently. GMAC is currently 21st on the list. Cerberus bought a 51 percent stake in GMAC to help GM out of debt. The Cerberus connection also allows GMAC to cut rates in support of its long-term strategy, compared to public companies that have to meet quarterly earnings expectations, said Kusumi. To date GMAC has lowered car insurance rates in 13 states. GMAC offers products such as low mileage discounts. "A key piece is of our strategy is price," said Kusumi. "We are very good at competitive rates and we are willing to sit and wait for market conditions to get better." Members buy only what they need when there is a sale:

Question of the week:
Should you pay off the mortgage or keep the tax deduction?
Many people keep a mortgage in retirement for different reasons. helps you figure it out for your situation:

Assets held by the world's highest-net individuals climbed 11.4% last year—Did yours?
Compare how your advisor/broker grew your assets last year to these benchmarks: U.S. stocks—15.5%, Foreign stocks—26.6%, Balanced—11%. Whatever you are investing in may not be right for your future. Diversification is the hallmark of the wealthy independent’s strategy. Many members find simplicity in only 3 funds. Consider their strategy in our FREE Guide:

Guaranteed income for life is THE sales pitch for annuities
“New Research Reveals That Guaranteed Income for Life is Top Retirement Goal for 97 Percent of Baby Boomers.” That headline captures the industry exuberance about variable annuities. The industry expects to seize the $5.8 Trillion in assets retirees have to spend in coming years. However, the small print obscures the fact that insurers protect themselves from losses that will cost retirees, one way or another. There is no free lunch. See alternatives:

Small business pension plan
The maximum contribution to your 401k is $45,000. Individuals age 50 or older are allowed a $5,000 catch-up contribution. The annual compensation limit is $225,000, according to You and your family in the business can participate without all the paperwork by using mutual fund or discount broker turnkey operations. A Roth 401k makes it tax-FREE.

It does NOT pay to save, study says
The U.S. system penalizes young, lower-income households that should be given incentives to save early in life. There is a federal tax on each dollar saved by a low-income family. Also they could qualify for the Saver's Credit and the Earned Income Tax Credit (EITC). However, the EITC gives them a zero or negative tax liability, which makes them ineligible for the Saver's Credit. The perfect Catch 22—earn and save and pay tax, then loose the credit. Our system penalizes the most in need of saving. On the other hand, it rewards those who DON’T need to save. See
INVESTing in the stock market pays. That is why most wealthy people pay a smaller percentage of income as income tax, according to Warren Buffett. Their income comes from their asset accounts getting bigger and bigger--your Wealth Reserve. See how our members “SAVE” and pay NO tax ever in our FREE Guide:

Credit score mistakes
1. Don’t close accounts after you pay them down. Leave credit card accounts open but paid up. Scores are based on your outstanding balances divided by your total credit lines. Less than 50% is good. 2. Don’t avoid credit counseling if you need it. In most cases it does not lower your score since you are trying to deal. 3. Your income and assets are NOT used to determine your score since they are not available in all cases. 4. There are many credit risk scores. Find out which your lender uses. 5. Maintain a high score by not being reported 30 days late or having a vendor hire a collection agency. Your score can fall over 100 points as a result. Members save on all their banking with our Guide:

UNUM does Group LTCi
Nearly nine out of 10 companies offering new long term care benefits in 2006 selected Unum as their provider, according to an independent survey of group long-term care insurance sales. Unum has a long history providing disability coverage with mixed reviews. Members check all the alternatives to this insurance with our Guide:

The SCAMS continue to flourish
John Hancock Life Insurance will pay $21.2 million to settle a Securities and Exchange Commission investigation of the Boston-based fund company's failure to disclose certain revenue sharing schemes. Hancock made deals with brokerage firms for recommending funds to their customers. The company will have to return $16.8 million of ill-gotten gains, plus interest, which will be split among dozens of John Hancock funds.

Wachovia Securities was fined $2 million for failing to adequately supervise its fee-based brokerage business between 2001 and 2004. Approximately 1,300 of Wachovia’s customers paid millions of dollars in fees that they shouldn’t have. By 2004, 44,000 customers were paying more than $110 million in Pilot Plus fees. But much of that money came from customers who should not have been charged investment fees at all. 594 Wachovia customers conducted no trades in their fee-based accounts for at least two consecutive years but still paid the firm approximately $1.9 million in fees. 620 Pilot Plus customers held assets of less than $25,000 for at least one full year, and paid at least the minimum annual fee of $1,000, or twice Wachovia’s stated top rate of 2% allowed under the Pilot Plus agreement.

Wachovia’s supervision of its fee-based brokerage accounts really collapsed when it came to the company’s cadre of high revenue-producing brokers, members of the “Red Carpet Club.” Wachovia exempted Red Carpet Club members from several steps of its review process. The NASD said that Red Carpet Club members' customers constituted approximately 99% of those accounts in Pilot Plus that held less than $25,000 in assets.

NASD assessed $1.25 million in fines against four firms for overcharging customers: Mass Mutual Life, New York Life, Ameriprise (American Express), and Northwestern Mutual Life. Each will repay their “customers” over $2 million but said they did nothing wrong.

About half of advisors spend less than 30% of their work time meeting with clients and prospects, according to a new study.

More scams are tracked for you:

Members avoid securities firms that play games with their money and time. Our Insiders provide members with the information to buy only what they need and save:

Is an annuity right for you?

Ruth was offered an annuity and declined
Member Ruth of FL was offered an annuity by her advisor using the phrase: “Annuities are a woman’s lifeline.” Her advisor said that annuities provide a predictable income for a more secure retirement. He said annuities appeal to women because women live seven years longer than men, are concerned about adequate income, and like the annuity guarantee that they can’t outlive payments. Ruth read our Guide which helped her decide to use a low-fee balanced fund instead. Ruth learned annuities cost more and earn less than she could on her own, have reduced payouts to women since they live longer, payout amounts are worth less in 20 years due to inflation, and charge for guarantees that are never used by 94% of contract owners. Ruth did her own planning for retirement spending with our Guide: