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!