A couple of recent articles got me to thinking about a side of our business we all would rather ignore ? kind of like crazy Uncle Joe.
Dennis Kozlowski, who blitzed Tyco International for $100 million to fund his lifestyle, is finally out from under penal supervision for the first time in nearly a decade. When the Feds finally caught up with him in the early 2000s, ?Deal-a-day-Dennis? was setting spending records for shower curtains and birthday parties, all paid for by the shareholders of Tyco.
Then last week a story from Bloomberg reported that the Labor Department, with support from the White House, will be proposing new rules targeted at reducing what the story called ?biased advice? from advisors that it says costs investors $17 billion a year.
?46% of Baby Boomers with full-time jobs said they believed they paid nothing (in investment management fees) and 19% believed their fees totaled less than .5%.?
?Industry research by Rebalance IRA
This tale of two stories reminds me of how the loser in these deals is almost always clients.
A big part of why this happens is because what we do is a mystery to most clients. A recent survey by investment management firm Rebalance IRA showed that many Americans believe they pay no fees in their retirement accounts. Get this: 46% of Baby Boomers with full-time jobs said they believed they paid nothing and 19% believed their fees totaled less than .5%? that?s one-half of one percent!
Let?s make this painfully clear: 65% of the 1,165 respondents in this survey are living in a dream world.
And, it?s probably because they were afraid to ask.
This is not about being a Boy Scout, but there is a great lesson and opportunity for us to impact those alarming statistics: do the right thing for our clients.
The bulk of my day job is spent talking with clients about fixed annuities. For the client in the right situation fixed annuities are a drink of water in the dessert. By the time we?ve narrowed the discussion to fixed annuities as a viable option, I tell them how I am paid. And, in the case of a fixed annuity, it?s fair to say most are stunned when they find out I?m paid by the carrier rather than from their money. Invariably they will say to me: ?So, you?re telling me if I give you $100,000 to put into this annuity that the whole $100,000 is going in??
I hear this, too: ?I?ve never had a person selling investments tell me how they were paid.?
Clearly that?s the case based on the research findings above.
I?ll say it again: most of what we do is a mystery to most clients, but it doesn?t have to be. So much about how we execute our business has changed in the last 20 years, mostly due to technology. But, what technology will never replace is a person?s desire to be treated with respect. And, I can?t think of anything more disrespectful than not laying out the details so they know exactly what they are buying and how much it is going to cost.
Do the right thing and you?ll have a client for life.
Thanks for reading. I look forward to hearing from you.
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