The Wall Street bullies are at it again. The large Wall Street firms, such as Goldman Sachs and Guggenheim (hope I spelled that correctly) are acquiring life insurance companies.
As many investors are seeking ‘safe’ havens for their money, annuities and other life insurance products are being aggressively sold by brokers and agents. ‘Give them what they want.’ Therefore, the Wall Street bullies are taking advantage of this to replace lost revenue.
Instead of coaching investors to continue to own equities, globally diversify and rebalance , the bullies are selling the new ‘hot’ product.
When John Dillinger, the notorious bank robber from the 1920’s and 1930’s was asked why he robbed banks and his response was
“because that’s where the money is”.
What the long term effects of this transition is anyone’s guess.
- Will life insurance companies begin to take more risks?
- Will this lead to another ‘bubble’?
- Will the tax treatment for life insurance remain unchanged?
- If you need the money prior to death will there be a tax ‘bomb’?
Ok, so the last two have nothing to do with the Wall Street bullies buying life insurance companies, they remain concerns about life insurance.
Please understand that I am not against life insurance when it is part of an overall financial strategy. What I am against is the Wall Street bullies using fear to sell more product. These bullies will add features to their life policies to entice investors.
Life insurance was never intended to be an investment vehicle.
Life insurance was intended to transfer risk of someone’s death to the insurance company. It was intended to pay expenses and replace lost income.
During times of fear investors look for security and safety. Many advisors accommodate their clients with the next great product.
To make the sale many agents will inform the clients of all the beneficial features. What they neglect to tell the client is all the fees they are paying to keep their money ‘safe’. They neglect to tell the client about the lack of flexibility when they own the policy. Many of the hidden features are NOT in the best interest of the client but rather in the best interest of the insurance company and the agent.
The concerns I have with many of these alternative investments is that the advisor/agent/broker are not acting as a fiduciary to their client. This is the primary reason the financial services industry is fighting the universal fiduciary standard. The suitability standard allows them to sell all the ‘product’ they want as long as it is suitable to the client.
Under the suitability standard there is no need to ensure that the recommendation is in the clients’ best interest.
Investors will be better served by working with an investor coach or fiduciary adviser to help them reach their financial goals. Sometimes this means coaching the investor to stay disciplined to their strategy even when it is uncomfortable to do so. Even when the financial media is proclaiming doom and gloom.
Every ‘crisis’ has a beginning and an end.
They do end it’s just that it seems like the end of the system while we are experiencing the crisis. After it is over it never seems all that bad. Your coach will help you through these tough times. A coach will point out your investment policy statement which is your guide during every emotional time.
Most investors make their investment decisions based on emotion rather than evidence.
To succeed in reaching your long term financial goals you need to follow three simple rules:
- Own equities
- Globally diversify
- Rebalance
Although they sound simple you will need the assistance of an investor coach to control your emotions.
Remember investing is not an investment problem it is a people problem.
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