Investing: Keep Up Your Guard - Washington Mutual

       January 1, 0000    1638

 

Do you like being taken advantage of? I sure don't. In fact, I hate it! Worse, it seems like it is happening more and more. Now, more than ever, it is buyer-beware. Read on for some specific examples and to learn how you can protect yourself.

Trust is involved when we buy a company's products of services. Companies spend millions of dollars a year in advertising trying to gain our trust. Employees, especially salespeople, are trained in what to say to build our trust in them and their company.

When I take the bait and find out that the product or service doesn't meet my expectations, I feel my trust has been violated. I've been taken advantage of just so the company could make another dollar. It used to be rare. Now it's common.

Take AARP for example. Founded as the American Association for Retired Persons, it quickly became the largest defender of senior's rights. It is still one of the most powerful lobbying groups in Washington. Its members trust it to act in their best interest.

That's why so many of them were surprised when AARP suddenly changed course and supported the Medicare Drug Bill. AARP even spent $7 million advertising their support! Members were stunned--only 18% of them supported it.

What could have caused this trusted voice of seniors to stop acting on their behalf? I'm not going to judge motives, but isn't it interesting that AARP stands to make millions of dollars selling its new prescription drug insurance called MedicareRX? Hmmm.

AARP receives more money from licensing the AARP name to products and services then it does from membership dues. They're becoming more of a marketing firm then a lobbying firm. Are their products truly in their member's best interest? Not always.

AARP mutual funds are a perfect example. Managed by Scudder, not a single one has performed in the top 20% of its category. Those who invested because of the AARP name have forgone thousands and thousands of dollars of growth due to low returns--while AARP has pocketed tens of millions of dollars.

The key point is that you shouldn't trust a product just because it has a familiar name associated with it. Do you homework and compare it to its competitors.

We can be taken advantage of in other ways. I recently responded to an offer for a 'free credit report'. It was provided by one of the largest credit reporting companies in the world. Surely it could be trusted.

Nope. Buried in the fine print is that fact that anyone who receives the 'free' credit report is automatically signed up for their credit monitoring service. Until you call and cancel, your credit card is billed each month. Since I used my debit card, I didn't notice the charge right away. The lesson? Be careful when signing up for 'free' offers, read all the fine print, and don't use your debit card for online purchases.

Lastly, I recently bought an electronic book online as part of some research I was doing on Equity-Indexed Annuities. The sales pitch explained that 'shocking' truths about annuities would be revealed. It's easy to find people promoting annuities and I was looking for an opposing view. This seemed to be it.

When I went to purchase it I learned that the information I was looking for wasn't included in the 'shocking truths' and that I had to upgrade to learn those secrets. The entire package cost $97, double what was initially advertised.

Worse, the material ended up being a sales pitch FOR annuities! I read the terms and conditions. They sell your information to list brokers and insurance agents. One of the 'bonus' services was the ability to talk with a live person about your situation. In reality, you would be connected to an insurance salesperson and received biased advice.

It shouldn't be this way. We shouldn't have to constantly keep our guard up to protect ourselves. But we do. Be careful who you trust--especially a financial salesperson. The people and companies that provide the products and services you use should repeatedly earn your trust. If not, they don't deserve your business.

Have a financial question? Send me an email and I'll personally respond, free of charge. Go to www.guardingyourwealth.com and click on 'Ask Jeff'.

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In addition to being a nationally syndicated columnist and Certified Financial Planning Practitioner, Mr. Voudrie provides personal, private money management services to clients nationwide.

 

Nationally-syndicated financial columnist and Certified Financial PlannerŪ Jeffrey Voudrie provides personal, in-depth money management services and advice to select private clients throughout the USA. He'll answer your financial question - FREE at www.guardingyourwealth.com.


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