Financial Adviser talking/selling crap products in lunch room

[teacherwithamustache]

So obviously I am a teacher.  For people with college degree's teachers might be the stupidest group of people when it comes to money and savings.  So my principal lets these "financial advisers" hold seminars in our lunch room about once a six weeks as long as they bring food for the staff.  So I go to these to listen to these snake oil salesmen and eat their free food.  I usually even take a sandwich back to my room with me.  I am astonished at how gullible the teachers are with these characters.  The main product that they were pimping was a variable annuity that would never loose value.  The looks in my coworkers eyes as they thought this was the best thing since sliced bread.  So it was a variable annuity that would never loose money and would grow a minimum of 2% every year Guaranteed.  So my coworkers are all astonished.  So they ask for questions and I start questioning them. 

Q:So this is a variable annuity so what index or asset class is my money being tied to?

A:S&P 500

Q:  So if the S&P grows at 12% I get a 12% growth on my annuity?

A:  Well no not exactly.  After the first 2% growth that is guaranteed your account will only grow a maximum of 8% a year.

Q:  So if the S&P grows at 14% I only get 8% growth on my annuity?

A:  Well no not exactly.  You only get 1 for 3 growth on your value (up to 8%)after the first guaranteed 2%.  So in your example if the S&P went up 14% you would only get 4.5% return.

So then I just start laughing and eat my free lunch while my coworkers stare at me for being that guy.  Which I kinda relish so I am just waiting there listening.  Then someone asks about fees.  No fees for the first 100K.  Then I ask about the 2nd 100K.  He replies less then 1% for the rest of the money up to 500k.  At which point I start asking how much less 20BP, 50BP, 80BP etc etc.  His response was 85BP annually in fees.  At which point I can not take it any more.  I get up and just start math whipping the guy.  I start drawing my allocation pyramids and ROI's.  Looking at historical returns on S&P 500.  He is so pissed at me. 

Usually I let these idiots give their presentations and if I am feeling froggy I will ask them about rolling over my old Keogh plan or what the tax advantages are to having a SEPIRA.  They usually just say they will get back to me and ask for my email address (none of them have ever emailed me an answer).  I was not going to let this dude get away with this.  That these guys prey on stupid public servants is astonishing.

The good part of all of this is that there is a husband& wife teaching pair there that are able to retire they are 58 and 60.  They came up to my room a couple of days later and asked me to explain retirement to them and how I budget everything.  I broke out my spread sheets and showed them everything and showed them my retirement budget and my living budget.  Then we looked at how much of a pension they would get.  They would get a 8k a month pension and they did not think they had enough to retire.  With 300K together in an IRA in addition to their pension.  They are also sitting on a 600k house that they have owned out right for years.  I told them congrats you are worth about 2.5Million dollars which shocked the crap out of them.  After I showed them the math and how easy and cheap it is to use Vanguard funds they went off and told all of the old guard teachers how awesome I am.  So now I have 5 or 6 teachers coming by to learn about financial stuff.  They even started bringing me food at our meetings.

So any other financial Adviser selling crap at work war stories?

[Sibley]

Good for you!

[Pooplips]

Great story.

[frugalnacho]

You the man.

[paddedhat]

My dear wife retired from teaching recently. She had $3100 owed to her for unused sick time. When asked to cut the check, the district informed her that the can only deposit it in a 403B fund she needs to open. Naturally, there is only ONE option of 403B provider,  and it's run by some one man shop operating out of the second floor of a store on Main st. (kickbacks anyone?) I opened the account, and immediately asked how long it would take to flip in into a Vanguard account? I have to admit that they rolled the money into Vanguard, pretty quickly, but not before they took their 1.25% annual advisor's fee. Nice scam, I wonder how many of these just get slowly nibbled at with fees, until the entire balance is in the advisor's account?

She also put up with the continual sales pressure of advisors, and other wizards, who offered free diners, "seminars" and special educator discounts. You are right on when it comes to the stunning lack of financial savvy that many of these folks have. I still get badgered by some of her teacher friends who "just love their advisors" and hope that we too would be smart enough to give the guy a call. sadly, some of these folks are still so clueless that they end up calling the advisor for counseling on every major financial move they make.

[teacherwithamustache]

I once had a coworker shouting to anyone that would listen how she really scored on a magical teacher only home loan program.  She got $2500 cash back at closing on her home.  I asked her what interest rate she was paying and she replied 5.9% for a 30year note.  I then asked her how bad her credit was and she said she had great credit.  She was so happy for her $2500 cash back.  I seriously thought about being her bank and having her finance her house thru me so I could make 5% returns on my fixed asset class.  It was way too much paperwork.

[Leanthree]

Anyone hocking product at a general lunch is a moron. Even if it is a product people actually need. But then especially with Variable Annuities. The salesperson should talk about dreams and goals and the importance of a financial plan and looking after loved ones. Only then do you bring up the Variable Annuity because it is such a great way to ensure you won't be a burden on your children.

Variable Annuities are an absolutely awful product versus nearly any other financial product. The problem is that most of these people's choices are either to buy a variable annuity or to buy a new truck. At least VAs force people to save even if they steal most all of the interest/growth.

[marty998]

Sounds like this could be a good consulting gig for you.

[MrStash2000]

I am a teacher as well so I know where you are coming from. Teachers are AWFUL with money. I think most have a very giving nature and fail to think of their own future.

I'm in a lucky situation, in my district both my 457 and 403b are with Vanguard. We have tons of options with providers. Very rarely will someone present and it is never during school hours, so I have never seen one. Thanks for setting the record straight at your school. You might have unknowingly helped people out.

[Retired To Win]

... my principal lets these "financial advisers" hold seminars in our lunch room about once a six weeks as long as they bring food for the staff.  So I go to these to listen to these snake oil salesmen and eat their free food...

The free food is just about the only good thing about these deals.  I've done the same thing many times; except in my case it's hoity-toity dinners at local name restaurants.  Fine.  I'll take the free food and the chance to meet some people any time.  But they can keep their financial products.

[Miss Prim]

Really, it is not just teachers, it is most people in general who don't know anything about finances.  I worked in Microbiology at a hospital lab and worked with quite a few people who were valedictorians and salutatorians of their respective classes and they would come to me for advice on finances!

All I know is from reading, reading, reading over the years about investing.  Also, I learned a lot from reading this site about how much money I would need to retire.   I was already frugal and putting away more than anyone I knew at work. 

One guy I worked with who also taught microbiology at the college level, moved all his money out of the stock market during the downturn in 2008.  I told him to just hold on and the market would go back up, but he was so spooked he moved it all to cash.  He missed all of the gains in the next few years!

I have found that most people's eyes just glaze over if you talk about finance.

                                                                               Miss Prim

[Tjat]

I'm in a lucky situation, in my district both my 457 and 403b are with Vanguard. We have tons of options with providers. Very rarely will someone present and it is never during school hours, so I have never seen one. Thanks for setting the record straight at your school. You might have unknowingly helped people out.

My wife has the same options...I can't quite understand why teachers have twice the pre-tax account options I have in the private sector... Gotta start working to convince her to max them both out

[Shane]

Recently, my brother, who has multiple advanced college degrees and is not a teacher but does work for the state, came to visit. We were talking and when I asked him what his retirement savings was invested in he said, "Oh, I have absolutely no idea. My financial adviser takes care of all that." I asked again, "Just generally, you know, like what asset classes is your money invested in, stocks, bonds, CDs, savings account?" Again, my brother claimed to have no idea where his money was invested... (I'm thinking WTF?)

After a couple days of joking around with him about it, I finally got my brother to attempt to login to his financial account online. Apparently he had never logged in to his account before...

It turns out the "guy" my brother calls his investment adviser doesn't have an actual office. He meets my brother once in a while at a coffee shop or a restaurant for lunch and they talk over how my brother's investments are doing. According to my brother, his investment adviser is a, "really cool dude."

It took me less than 5 minutes of looking over the half dozen funds my brother's retirement savings is invested in to just shake my head and tell him to get all of his money out of there as quickly as possible. Every fund my brother owns has a 1%+ expense ratio/year, and several of the funds had front loads as high as 5.75%!

I told my brother, "Your financial adviser may be a really cool dude, but he is not looking out for your best interests, because if he were, he would NEVER have you invested in these rip off funds!" I sent my brother links to Vanguard and recommended he choose one of their Target Retirement Funds. He said he was planning on following through on my suggestions, but I'm really not sure if he will. When we were talking about it he just kept repeating his mantra that, "I'm not interested in money. I don't like to think about investment stuff. It makes my head hurt..."

I feel like I've done my duty to help my brother. If he has more questions, I'll be glad to answer, but I'm not going to worry about whether he follows through and gets his money away from Richard the Financial Adviser. That's up to him. I think I read it somewhere on here that you should never work harder helping someone than he is willing to work to help himself...

[arebelspy]

For people with college degree's teachers might be the stupidest group of people when it comes to money and savings.

Word.  The wife and I were teachers and had to put up with the stupidity of colleagues, and the financial advisors pushing products at us at lunch times.  I loved your story!  It was so sad how many teachers got taken advantage of by AXA and the like.

[TheThirstyStag]

So obviously I am a teacher.  For people with college degree's

Intentional?

[Yankuba]

So obviously I am a teacher.  For people with college degree's

Intentional?

What about loose? Five points off!

[Jack]

So obviously I am a teacher.  For people with college degree's

Intentional?

What about loose? Five points off!

For several reasons, I'm hoping teacherwithamustache teaches math.

[Johnez]

^You guy's ever herd of a typo? I substitute the wrong "there" or "to" on occasion, even though I know the difference! :-0

***

I love these type of stories, mainly for the satisfaction of a resolution. Most financial incompetence I'm exposed to is already happening and nothing I can do can change it. "Yo brahs, I got this awesome vacation plan thing that lets me stay at this house whenever I want, but I pay every month, got a free cruise out of it..."

[Debts_of_Despair]

I am meeting with an advisor tomorrow to get my wife enrolled in a 403b.  Her district gives teachers money just for being enrolled so we can't give that up.  The only available providers are all insurance cos or single shady guy operation.  Really pissed I can't go through Vanguard and be done with it.  Although I am hoping to troll them a little bit with my 'stache. Hoping to get a "does not compute" answer when his computer tells me how much I should be saving. :)

[runningthroughFIRE]

^You guy's ever herd of a typo? I substitute the wrong "there" or "to" on occasion, even though I know the difference! :-0

***

I love these type of stories, mainly for the satisfaction of a resolution. Most financial incompetence I'm exposed to is already happening and nothing I can do can change it. "Yo brahs, I got this awesome vacation plan thing that lets me stay at this house whenever I want, but I pay every month, got a free cruise out of it..."

It would be hard to type with hooves =p

[Debts_of_Despair]

Well I met with the adviser and things went somewhat better than expected.  I was able to setup the account with a Vanguard target date index fund.  The bad part is a 1% annual fee that goes to the adviser and a $40 annual fee that goes to the brokerage company.   There is also the expense ratio for the index fund. It is kind of infuriating that there are two overhead agencies that are essentially doing nothing but will keep collecting fees for perpetuity. 

[RangerOne]

How can people make decisions about their money without knowing at least all the basic rules governing them? I don't think its just teachers. The majority of people in all occupations have questionable grasps over their personal finances.

@OP good job shutting the snake oils sales me down. Nothing irks me more than a crook preying on the ignorant. People that do this crap should honestly face legal penalties or at least get punched in the face.

[Tjat]

Well I met with the adviser and things went somewhat better than expected.  I was able to setup the account with a Vanguard target date index fund.  The bad part is a 1% annual fee that goes to the adviser and a $40 annual fee that goes to the brokerage company.   There is also the expense ratio for the index fund. It is kind of infuriating that there are two overhead agencies that are essentially doing nothing but will keep collecting fees for perpetuity.

Does your employer allow in-service rollovers? You may be able to deposit to get the pre-tax benefit and 1x per year, roll over to a Vanguard IRA with the 0.05% VTSAX expense fee!

[shelivesthedream]

Why won't people market financial crap to meeeee?!? I would love a free lunch and a mathematics-meets-common-sense takedown.

[pdxbator]

I would have loved to have been in that meeting and cheered you on. My husband is a teacher too. Prior to my whole awakening about Vanguard and low-cost mutual funds he invested in some super shady investment vehicles from the same kind of thing that you describe. The district has multiple advisers that are allowed to come into the school and hawk their crap investments. Many many of his colleagues are invested in this. Luckily upon my awakening we have gone through and corrected a lot of what he was invested in.

He had a hard time telling the adviser that he was changing the course. I think this is were a lot of people find it tough. They think that this nice person has their best interest and then a rapport grows with that person. That person becomes sort of a friend to consult that will take care of it all. Really what we need is more regulation of these kinds of investments. Billions of dollars are spent wastefully and the best interest of the consumer isn't being met.

[StockBeard]

Recently, my brother, who has multiple advanced college degrees and is not a teacher but does work for the state, came to visit. We were talking and when I asked him what his retirement savings was invested in he said, "Oh, I have absolutely no idea. My financial adviser takes care of all that." I asked again, "Just generally, you know, like what asset classes is your money invested in, stocks, bonds, CDs, savings account?" Again, my brother claimed to have no idea where his money was invested... (I'm thinking WTF?)

I'm not laughing. This was me, less than 2 years ago. Only my procrastinating nature saved me from moving all my savings into the stupid insurance plan my "adviser" had put me in (see http://forum.mrmoneymustache.com/investor-alley/i-dun-goofed )

[Debts_of_Despair]

Does your employer allow in-service rollovers? You may be able to deposit to get the pre-tax benefit and 1x per year, roll over to a Vanguard IRA with the 0.05% VTSAX expense fee!

I'm not even sure who I would ask that question to.

[retireatbirth]

Real estate guys do this also. They try to get you to buy timeshares and stuff. My parents are retired and they used to go to those as often as they could for the free meal. It was quite a good meal, but eventually they stopped getting the invitations lol.

[The_path_less_taken]

Timeshare presentations, $25 free certificate for taking a test drive, free food seminars...

I used to bait the live traps with cat food for raccoons.

Just saying. "Free" rarely is.

[dude]

Well I met with the adviser and things went somewhat better than expected.  I was able to setup the account with a Vanguard target date index fund.  The bad part is a 1% annual fee that goes to the adviser and a $40 annual fee that goes to the brokerage company.   There is also the expense ratio for the index fund. It is kind of infuriating that there are two overhead agencies that are essentially doing nothing but will keep collecting fees for perpetuity.

Ugh, my wife's company's 401k (Northwest Mutual) has a .99% management fee on top of each individual fund's expense ratio.  Some are as high as 1.5%! (so 2.4% with the management fee!). The "advisor" allocated her account for her, unbeknownst to me.  He had her in TWELVE different funds, all with expense ratio + management fees of 1.3% or greater.  I was so fucking pissed.  They had exactly ONE fund worth a damn, and that was Vanguard's S&P 500 Fund (0.05%), so even there, she's paying 1.04%.  I put her 100% in that fund.  I used her rollover IRA from her old job to diversify her a bit more into a few other holdings.  It's criminal what these assholes charge.  She said they can't change management companies because one of the principal partners is friends with the guy who offers their 401k.  Criminal.

[dude]

How can people make decisions about their money without knowing at least all the basic rules governing them? I don't think its just teachers. The majority of people in all occupations have questionable grasps over their personal finances.

@OP good job shutting the snake oils sales me down. Nothing irks me more than a crook preying on the ignorant. People that do this crap should honestly face legal penalties or at least get punched in the face.

THIS is the lobby spending millions to thwart the CFPB's efforts to attach a fiduciary duty to ALL financial advisors.  Their opposition to such a duty is all you need to know about these fucking crooks.

[ooeei]

I'm not laughing. This was me, less than 2 years ago. Only my procrastinating nature saved me from moving all my savings into the stupid insurance plan my "adviser" had put me in (see http://forum.mrmoneymustache.com/investor-alley/i-dun-goofed )

Just read through that whole thread, very interesting stuff!

[boarder42]

Why won't people market financial crap to meeeee?!? I would love a free lunch and a mathematics-meets-common-sense takedown.

favorite. we need favorite buttons here

[arebelspy]

Why won't people market financial crap to meeeee?!? I would love a free lunch and a mathematics-meets-common-sense takedown.

favorite. we need favorite buttons here

We have this.

[Goldielocks]

I am a teacher as well so I know where you are coming from. Teachers are AWFUL with money. I think most have a very giving nature and fail to think of their own future.

...

If teachers are awful with money, they could do worse than overpaying for guaranteed small returns.

The part I don't get is the fact that they already have a pension, so why would they need a variable annuity on top of that....?  seems like selling omelettes to an egg farmer..   Without a pension plan, and adding gullible people, then, yes, locking the money away from other, worse charlatans, or their own free spending, could have a certain benefit.

[Debts_of_Despair]

Ugh, my wife's company's 401k (Northwest Mutual) has a .99% management fee on top of each individual fund's expense ratio.  Some are as high as 1.5%! (so 2.4% with the management fee!). The "advisor" allocated her account for her, unbeknownst to me.  He had her in TWELVE different funds, all with expense ratio + management fees of 1.3% or greater.  I was so fucking pissed.  They had exactly ONE fund worth a damn, and that was Vanguard's S&P 500 Fund (0.05%), so even there, she's paying 1.04%.  I put her 100% in that fund.  I used her rollover IRA from her old job to diversify her a bit more into a few other holdings.  It's criminal what these assholes charge.  She said they can't change management companies because one of the principal partners is friends with the guy who offers their 401k.  Criminal.

Well I guess I'm not alone.  I can live with the Vanguard expense ratios but everything else is BS.  Theoretically I could meet with this adviser one time and they would keep collecting their 1% annual fee for the next 25+ years, all for one 30 min meeting.  That isn't right.

[shelivesthedream]

Why won't people market financial crap to meeeee?!? I would love a free lunch and a mathematics-meets-common-sense takedown.

favorite. we need favorite buttons here

*glows with warm fuzzies from mild praise from Internet stranger*