Deceived for Commission

Some idiot financial advisor came to my workplace circa 2006 advising everyone to take zero-downpayment, interest-only mortgages, which were widely available at the time and were what fueled the housing bubble.

Then use the proceeds to buy life insurance as an investment.

I recall asking him, what happens when the interest-only period expires and you're required to start paying principal? "Oh, don't worry, you can always refinance into another interest-only loan. "Obviously I did not follow his advice, and we all know how the real estate market ended up after the 2008 crash. (I ended up buying my house in 2012.)

I was 29 and rolled my 401k from Virginia Tech to an “investment guy” at my bank. He was the star football player in high school and had no actual qualifications for investments. I rolled my $40,000 into the bank investment account. In less than 90 days it was down to $18,000 in value.

I had them sell everything and rolled it back out to another firm. When I complained the investment guy said “you are only 29 and you will make it back.” Yeah, but it took me 5 years to build up that $40,000 and he destroyed more than half that in 3 months.

Both of my parents saved their money with one of the giants in this field (as tempting as it is, I will not name them). When you visit their offices, there is lots of polished wood, hushed tones, and big conference rooms as they very seriously do their job of turning the assets entrusted to them into more money.

I was executor for both of my parents' estates (they were divorced), so I got an up-close-and-personal look at what the investing company was doing, but only after the fact. My father thought of himself as a savvy investor, so he managed his money himself. He was, in reality, the epitome of the “Poor Dad” and couldn’t find a good investment with a flashlight, a compass, and someone pointing him right at it.

My mother was the polar opposite; she totally trusted this investment company. Over more than 50 years, they both managed their retirement assets this way. While my mother “won” this race because she had more money when she passed, the fact is that if you look at how much money she handed over to them and how little they actually did with it, it’s just sad.

When it was time to unwind her accounts, she was diversified to the point of “diworsification." There was no rhyme or reason for what she was invested in. It was as if the plan was to see if there was a possibility to buy a little bit of everything. She was in every high-load mutual institutional fund you could possibly find, and a smattering of international institutional funds as well. What a mess.

They wanted to hand this over to the heirs as-is and not sell any of it. I insisted they cash all of this mess out and only transfer the money to the heirs. They did this for everything except her IRA, which they transferred as-is. I received $13,000 (give or take) worth of 20 different mutual funds. That’s just nuts.

So, don’t be swayed by the big conference rooms and the fancy offices with their name on the top of the building. These folks are totally in it for themselves, and if they make you some money, it was by accident.