Last week I was contacted by a spokesperson of my personal bank because she wanted to explain a bunch of new services they had on offer. Even though I usually am weary when someone seeks me out to promote a service, I reluctantly agreed to stop by. Who knows what they had in store that could accelerate my journey towards financial independence?
Now, if I had to name three types of professions Belgians don’t like, banking folk would definitely make that list, together witch certain types of lawyers and politicians. Especially after the financial and economical crises of 2008 it seems hardly anyone finds financial advisors trustworthy, which isn’t too surprising considering tax payers had to bail out one of our largest banks. On top of that the government was forced to sell another bank to the French BNP Paribas.
Although I’m not one to dislike certain groups of people based on the actions of a few rotten apples, it’s better to keep your guard up when financial advisors try to sell you one of their services. And I must say, I’m glad I did when visiting my local bank’s offices.
Below you can find five of the things the bank’s financial advisor told me during our one hour conversation that made me take off at the speed of light when she finally understood she wouldn’t be able to get me to sign anything and released me from the clutches of her fancy office – admittedly, she was sitting behind a really nice oak desk.
1. I’m sure this is a product tailored to your needs. Trust me.
Never trust anyone to be sure about something. Chances are they’re not even remotely certain. I don’t even trust myself to be certain about all things money. When I have to make an important decision at work that has significant financial consequences, I’ll always make sure to get a second opinion, so why would I trust some complete stranger to be sure about my own finances?
Authority-based reasoning is a very popular tactic of sales people because it often relies on good faith. Thankfully we both see right through that! Never trust anyone simply because they’re wearing a nice outfit or because they boast an impressive desk.
Never trust anyone with your money, as a matter of fact. No one cares about your hard-earned cash as much as you do, so don’t trust your financial advisor to. He only cares about what your money can do for him.
2. I won’t be able to run the numbers at this very moment, sorry.
This is another early-warning sign and a big no-no. Almost anyone can make up stuff on the spot and make it sound believable by telling it to you with a straight face. But we’re not interested in that, are we? We want cold, hard numbers.
When my financial advisor tried to push one of her long-term life-insurance policies on me, she was certain it would be wildly benificial to me, even though the annual interest rate was only 2.25% before taxes for the next 40 years. When I asked her about the math behind her reasoning, she immediately fell through the floor. She couldn’t reproduce the numbers because of excuses like software maintenance downtime.
Also, at this point during her sales talk I was having a lot of fun educating her about the effects of the European Central Bank currency stability and economic growth policies on the return of her life-insurance product. She had no idea what I was talking about.
3. Might I suggest taking out a low-interest loan?
When the bank’s advisor discovered she wouldn’t be signing me up for one of their savings or insurance products, she quickly turned the cart around and looked for services that could get me to spend more. “Of course, with the current sluggish economy it makes sense to spend instead of save.” Her words, not mine.
Because she specifically targets recently graduated twenty-year-olds, she apparently often sells low-interest car loans. With these young people just starting their first job it’s impossible for them to buy a car outright, “which obviously is one of life’s many necessities” (sic). There’s so much wrong with this reasoning on so many levels that I just wanted to punch her right there and then.
Who cares if it’s just a 1.9% interest rate? That’s 1.9% too many! If your financial advisor ever tells you to take out a loan to pay for a lifestyle you can’t actually afford, you better start running. Fast.
4. Don’t mind that. It’s just 1%.
Because I was trying to salvage my trip to the bank and the time that had cost me, I asked my financial advisor about the pension funds they had on offer. You see, in Belgium it’s possible to build your own retirement fund on top of the government mandated pensions and receive a 30% tax-back on every Euro put towards your own fund. Too bad the limit isn’t even close to the United States 401k variant at only €940 for fiscal year 2014.
Anyway, she told me they had several types of funds on offer, but I quickly noticed the 1% transaction costs on every contribution. Her response? “Don’t mind the 1%, all banks have it and you’re not losing any money because our fund manager always recovers the fee with his excellent returns.”
That’s three things in one sentence you should never accept from your financial advisor: don’t mind something, you won’t lose anything even though you pay something, and our manager always delivers good returns. Lies!
5. We’ll help you optimize your taxes.
Have you ever asked an expert to help you optimize your taxes, thus lowering your overall tax burden? You probably know that these people don’t come cheap, so it’s highly unlikely that a banking institution would help me to reduce my tax rate out of the kindness of their heart. Yet, that’s what my financial advisor proposed.
I allowed her to humour me and she didn’t disappoint. Exotic constructions with expensive percentage-based fees weren’t immediately obvious, but they were definitely there. I consider myself to be pretty financially literate, but I didn’t even understand half of what she was proposing – and neither was she, I think.
Another huge warning sign! If you don’t understand it, don’t buy it. Chances are you’ll get burned in the end because it’s not for you.
What about you?
That’s a lot of advice from a random Belgian fellow! So according to the first reason mentioned above why you shouldn’t trust your financial advisor, you better not trust me. Always be critical when your own money is at stake.
It’s never fun to lose your hard-earned cash because you didn’t take five seconds to think someone’s advice through though. Have you ever had any experiences like that and was your financial advisor to blame? Please share your story in the comments!
Thankfully, I’ve never had such a bad experience with any bank, although I see these types of things in the adverts for the banks’ products quite a lot, well, I used to anyway. I think they’re looking slightly more conservative these days. Quite a lot of banks are now offering good rates of interest, and at least one high St bank is offering free budgeting software built-in to it’s online banking system. I took a look at it, it’s pretty good!
But certainly a few years ago, mostly before the financial crash, I used to see things along the lines of what you experienced. One of the main crazy things was ‘structured products’ and ‘guaranteed equity bonds’, which are certainly NOT bonds. Thankfully, monevator put out a fantastic article on how to created your own cheap, guaranteed equity bond that really was guaranteed. Thank God for the wonderful blogs out there who don’t waffle on… Oh, like yours!
You’re right that banks have become more conservative the past few years, mainly after public backlash and legislative crackdowns. The really big banks in Belgium still think they can get away with a lot sadly.
I had no idea what guaranteed equity bonds were, but after looking them up: awful product! I can imagine some poor soul buying into a scheme like that.
If you want waffles, keep on walking, my friend! 😉
I (a fellow Belgian) actually did some research of our banks for the retirement fund, because I’ll start working soon. If you do it at Argenta (I’m not linked to them at all, not trying to make some advertisement), they don’t charge you any % (not even 1%) for putting money in. Btw, I think even with this 1% it still is a good deal. You get every year 30% cash back, but the full amount still is in a well governed fund. Just my 2 cents.
Have a great weekend!
You’re right that not all banks charge you a transaction fee! I have my current pension fund also at Argenta (ARPE Dynamisch) and I’m quite happy with how it’s been run, although the management fee is too high for my liking. Another good pension fund is KBC Pricos if I’m not mistaken.
The 30% tax advantage every year is the only thing that makes these pension funds advantageous. I prefer an account in which I can do my own thing rather than have a financial institution manage my assets though.
Enjoy your weekend,
Yes, if it wasn’t for the 30% tax rebate, I wouldn’t invest in those funds as well. That’s why the government created the rebate. If you reach financial independence, you can use your dividends and put them in the pension fund, so the power of compounding really starts to work 🙂
The sad thing is that there will be people who would have accepted what that financial advisor had said as fact and they would have ended up parting with their money, not knowing any different. In fact, on the ‘advice’ of their bank, my own parents invested in some ‘guaranteed bond product’ (probably one of those that M mentioned) which after 10 years (and 10 years of fees) ended up with them having less money than they started off with – some guarantee!
Exactly right! While I was sitting there, it dawned on me that a lot of people would probably just sign anything that they could get their hands on.
I’m sorry to hear your parents had awful advice like that from the bank and lost a lot of money. It’s terrible to end up with less money than you first had because of shady products.
Hopefully we can educate more and more people to be vigilant!
I’ve talked to the financial advisors at banks a few times and I came to the conclusion that they don’t know nearly as much as I do when it comes to personal finance and investment. They are just there to sell me high MER mutual funds so they can make a buck or two.
I don’t think you’re wrong – I had the exact same feeling. Some of them probably are highly competent people, but those are probably assigned to the more wealthy and lucrative customers.
Of course, I get that a bank needs to be profitable, but there’s no excuse to try and rip off people like that.
I know the bank I conduct my business with it seems there is two different levels of advice. My personal belief is that it is determined by net worth. Once you have over $50,000 or $100,000 you get to speak with one of the financial advisors that have a lot more education than the type that Tawcan has mentioned who takes a couple CSI courses to be able to sell high priced MER mutual funds.
Mr. Captain Cash
Without realizing it, I just responded to Tawcan with the same answer as you just gave here. It’s possible that wealthy customers get to deal with better advisors.
Still, that’s no excuse to rip people off as much as legally possible. I’m glad there are at least some legal restrictions in Europe and that there’s a cool-off period of one month.
Good post! I would also add paying advisers for average or below average performance.
I’ve not had the good fortune – ahem – of running into any paid advisors. I get that some people don’t want to deal with money too much, but how hard is it to educate yourself for a day or two and set up a simple passive index portfolio?
My favourite bank outing was when I went to get a teeny-tiny investment for free banking (Canada, ugh) and the advisor told me that only mutual fund were available — not EFTs. E. F. T. I asked if he meant ETFs and he looked puzzled for a moment and said no.
Haha, that is one of the best and most ridiculous stories I’ve ever read. 😀 Thank you for sharing!
It’s ridiculous that you had to correct a bank clerk on something as simple as exchange-traded funds. Clearly goes to show that these people are only hired for the sales skills.
My experience is that the financial advisor normally tries to sell you products of the bank he works for. So, you have to think twice before buy when the product is one of theirs…
That’s exactly the same feeling I’m always getting. I don’t really mind that they’re trying to sell me a service, but at least make it worth my time (and money!) instead of just trying to rip me off.
Some of my family members also complain bank account managers keep calling them with “interesting new offers” etc. My mom’s account manager told her she didn’t like making these calls but that the higher ups are always pushing them to fill quota.
They keep calling even if your mother asked them to stop? Not only is that rude, for me it would be a reason to start looking for another bank. There’s always something out there that’s better.
Thankfully your mother is smart enough not to buy in their schemes!
You lucky guys! Greece had that 30% tax-back few years ago too. After the last Greek crisis all these kind of retirement investments stopped working like that, so now it’s just high management fees for no advantages!
My experience with a “bank lady” was few months ago when I just wanted to close some money in a CD. She said “Have you thought of investing in our new mutual funds that are not so dangerous cause except the stocks, they have some percentage of the money in bonds?”
She sounded like she invented the wheel! I wanted to say “Really?! I only wish this was possible with a cheap stocks ETF and a cheap bonds ETF… oh wait, it is!”
But I behaved and just said “No thank you!”
It’s always fun to visit the bank though and learn all the new fashions in mainstream investing!
I don’t know about lucky, but it’s a nice bonus to have! I’d rather have the American 401k system so I could invest in something other than specially designated and expensive mutual funds. 😉
After the government did away with your 30% tax-back, we’re you able to retrieve your funds or are they just stuck in those mutual funds? That sucks hard. I hope you don’t have to much money in them?
Haha, I like how the selling argument of these people is that “it’s not dangerous”. That’s a very good way to get me on edge and doubt everything you’re saying. Higher returns warrant higher risk, that’s the way it is. No way you’ll be able to reduce the risk more than the next bank.
Thanks for sharing, pal!
I think people in the USA would put those 3 professions in their top 5, unless of course you ask someone from one of those professions. I find institutions with pushy sales-oriented service people (whether its tellers or advisers) just a waste of time. Besides, I would think DGI’ers can invest better on their own. The only ones who get commissions are the brokers and ourselves. No reason to flush anything extra down the drain.
Also when it comes to taxes, you are correct. No reason to use a tax professional, they cost a lot. They are only useful if you have a really complicated filing or year.
Overall good job resisting the push, which is a pain to do. Some sales people get it, but most just don’t know when to stop.
– Dividend Gremlin
I don’t think there are many countries where the majority of people view the professions mentioned above as highly as they once were. Lawyers have gained quite a lot of credibility over the past few years in Belgium, but that’s still nothing compared to the excellent social standing they had 50 years ago.
Pushy sales people definitely aren’t my cup of tea. Mostly they just bother me, but sometimes I’ll try to make fun of them. Especially for investing I’m probably better off on my own and the excellent advice of the DGI community.
Thanks for stopping by again! I really like reading your blog too, but still can’t comment. Hope you get to fix that soon.
I could not have said it any better: Never trust bankers, politicians and lawyers. The Arcopar case is there as our perpetual remembrance…
In my experience, if someone tries to sell you something, for sure they will make a bigger profit out of it than you will…
Not all of them at least!
I’m glad I wasn’t old enough to buy into Arco, but it rieks of all things evil. A lot of miscommunication and deals behind closed doors, I think. Although I hope the people who invested in Arco get their money back, I also hope it’s not the general tax payer coughing up that money. They should go after the banks and resellers first.
Someone who approaches you with a product or service always has something to gain, so it’s a good idea to stay vigilant indeed.
Thanks for stopping by and commenting, much appreciated!
The rest are okay really except for number one.
If they are trying to rush over the deals without even knowing if the person background or needs, then they are just pushing the deals that make them a sly snake salesmen. Really irritating in that case.
I don’t think any of the examples above are acceptable. Maybe it depends on how it’s said or how the services are being sold, but all of the examples have a high level snake salesman or even snake oil to them.
I’m sure you’re also too smart to fall for their traps though!
This is one reason of why I switched from a big bank to a smaller one. Last year I had to visit the big bank for a small government thing that the small bank couldn’t help me with, and then the lady who was standing next to the lady who was actually helping me, started asking me questions about my personal finance so as to sell me big bank’s products. It was very rude.
Otherwise, I’m quite happy with my small bank, who don’t push products on me. Oh wait, there’s a letter roughly twice per year about their investment products, but that’s about it. I think that’s manageable.
I’m intending to keep flying under the radar, so that I don’t have to listen to financial advisors all too often. I think the financial advisors who come flying in when you have 50k or more to spare are just blown up versions of the financial advisors that you get when you have 1k…
Thank you for stopping by and taking the time to leave a comment.
There’s a big difference between differently sized banks indeed. Personally I prefer my smaller bank over the bigger one I’m also a customer off. Yes, they aren’t always on top of new trends like mobile banking, but their service is so much more personalised.
I agree that a letter or two every year with new service is manageable. That’s also acceptable considering that banks actually have to be profitable. If they start sending me bogus ads or giving me bad advice, I’ll be the first to walk out the door and never come back.
My new general rule is never to visit a financial advisor unless I asked for it myself. Sometimes it’s very useful to be able to fall back on someone with the tax know-how, for example.
PS: great blog of your own, really liked browsing through it!
I will type the reply in dutch since it will go much faster.
Ik vind het best wel grappig als ze weer eens een poging doen om mij iets aan te smeren. Met dat ik zelf in de verzekeringsector werk weet ik in veel gevallen hoe ze hun percentages berekenen ( en de kosten dus ook). Ooit heeft er me een een levensverzekering proberen aan te smeren(al niet vrij slim als je weet dat de persoon voor je in de sector werkt). Ze zat daar dan te zwaaien met allerlei tabellen en ze vraagt zijn er vragen en dan vroeg ik ja is het een tak 21, 23 of 26. Ze hoorde het dan precies donderen in keulen… Dan heb ik naar de kantoorverantwoordelijke gevraagd en meegedeeld als ik nog een keer zo een persoon voor me heb dat ik onmiddelijk mijn rekening sluit en verhuis van bank.
Sindsdien krijg ik een ‘bekwamere’ adviseur en ieder jaar een kratje wijn 😀
That’s OK. Your post is also quite hard to write in English because it’s very specific to our own country.
It’s kind of sad that an insurance advisor couldn’t tell you the difference between Tak21, 23 or 26, or even worse, tell you what type of insurance product she was trying to sell you.
Good job on the wine though! Should try that out myself some time! 😀
Thanks for sharing,
What a fascinating and hilarious experience! (although also very very concerning!) There’s no way I would have been able to compose myself for that full hour with all that nonsense though! I’ve never talked to a financial advisor, and certainly don’t think I will any time soon, especially one at a ‘big bank’.
We just need to get more people reading this blog so these advisors have less people to try and take advantage of!
It was one of the more awkward and funny conversations of my life for sure! 🙂
Don’t feel bad you’ve never talked to a financial advisor at a big bank. I’m 100% sure you’re way smarter than anything the bank can throw at you and that you’ll be fine on your own.
My sister, who isn’t too big on all things finance (even though she runs a tight ship), saw through one of the same sales talks recently. She was really annoyed that they believed her stupid enough to give her money to them.
Hope you are well down under!
Ah man, that reminds me of a European investment adviser that had entry costs of 2% or so… Until I mentioned what US online brokers charge in commissions. This advisor actually went to take a look to see how he could also have access to those commissions…
Ie. Go with advisor and pay $2k on a $100k investment, or do it myself with broker, diversify in either a few ETFs or some dividend growth stocks and pay around $150. I almost felt sorry for him, almost… :).
I think equity investment advisors hate buy and hold dividend growth investors, not enough churn for commissions.
My biggest annoyance was that by trusting them with my funds, it would hinder my own learning and investment process. Especially being in a capitalist society like the US, you better learn about money and investments as soon as possible.
Good job on some critical thinking on your part, I hope you can help out some of your friends by educating them a bit in finance, even if it’s only a little or I fear they might end up falling for the banks schemes.
2%!? Where can I sign up for such a lucrative commission?
You make a great point about forgoing your own learning process by entrusting your funds to an advisor. There’s no reason why someone else is able to manage your money better than you can, all you need is to invest a little time and plan your strategy.
Most of my friends are lost causes already. They’re not financially literate enough to understand how the bank’s products work exactly. I’m glad that they at least don’t rack up thousand of Euros of credit card debt!
Have a great weekend,
Great write up. I wonder if financial advisers every read good posts like this.
Thanks, I appreciate it!
Judging by the knowledge of the financial advisor mentioned above I highly doubt it. 🙂
You offer some great advice here! Just this week, we discovered some fraudulent activity on a credit card Mr. Maroon no longer uses. While on the phone to report it, the rep tried to sell him on a personal line of credit! While I am annoyed that they have the nerve to ask, I am also astonished because I have to believe that they ask because it works… How does someone start a phone call by reporting credit card fraud and walk away with a blank check for spending money they don’t have? Why is that okay to some people? How could you get talked into such a financial decision with no other considerations?
That’s one special kind of service when you report a stolen credit card and they try to have you walk away with an extra line of credit! I understand that financial institutions have to make money, but they all too often cross the line in terms of what’s good for their clients.
The sad truth is, like you said, that many people fall for these practices without thinking twice. Some will have huge Dollar signs in their eyes when they’re offered more credit, while others have no idea what they’re actually signing-up for.
I’m glad that in the EU we at least have some degree of protection from financial institutions in that they have to test a client’s financial knowledge and perform a check-up of their financial security. On top of that, we can annul any contract within 30 days after signing, which is a lifesaver for many people.
Thank you for stopping by,
My biggest mistake due to “financial” advisor was when I got my pillar 3a here in Switzerland.
The guy sold me one tied to a life insurance which so far made me lost about CHF 11’000 of cash.
How he did it? Simple!
I wasn’t that much financially aware at the time and he told me:
“Look, you are gonna have a family now.
You will be responsible for your wife and children lives.
You must think about what would happen if you would die?
I hope it will never be the case. But what if? Etc etc etc…”
So my advice: when someone try to play on sentiments, then RUN!!! It is that he didn’t find any other rational mean to convince you.
I plan to write a complete article about this which was my worst financial move so far. But I think it was a mistake that had to happen once so it never happens again!
After all, as @tawcan said, most of these people don’t know that much except what they have to sell unfortunately. Or worse, they know too much that they can manipulate you easily.