Posts Tagged ‘Paul Puckett’

The Fears That Cause Investiphobia – Book Excerpt

July 30, 2009

The following is an excerpt from the book, Investiphobia – You Can Invest Without Fear. There are eighteen fears that cause investiphobia. To successfully treat investiphobia, you must know the cause. The following fear is common and directly relates to the previous post about Equity Index Annuities. Almost all annuities have surrender charges and some have lengthy surrender periods. You should know the access you will have to any investment, prior to purchasing, and you should make sure that you are comfortable with any limitations to your access. It is perfectly fine to use products that have surrender fees for a small portion of your portfolio. But, no matter how good a product sounds, you should make sure that you have access to the majority of your funds. We do not know the future, plan accordingly.

To purchase the book, visit, www.amazon.com.

Fear of Losing Access to Money

Every day, senior citizens across the United States buy investment products that have lengthy surrender periods. You have probably heard on the news, or read in the paper, about someone who cannot get access to their money because of the product that they purchased. This happens fairly regularly, and it is scary to anyone who is retired.

I read an article in a professional journal recently about a woman in her seventies who bought a product with a limitation on access that lasted for over twenty years. She would not have full access until the age of 105! Someone convinced her to put most of her money into this product. Thankfully, the company canceled her purchase and returned her money with interest. How did this happen?

The article did not cover the specific product that she bought. It may be an appropriate product for someone, somewhere, but it clearly did not fit her needs. In my opinion and experience, the cause of this type of sale is either greed or inexperience on the part of the salesperson. They probably attended a seminar and heard great things about the product and the commission that they would earn if they sold it, and they thought she might benefit from it. I’ll bet it had a tax-deferral feature and some guarantees.

Some of the products that have these lengthy surrender charges are good products, and some, unfortunately, are not. In either case, we know that there are products that limit our access to our own money. Some people are fearful that this may happen to them. Some people are paralyzed by these fears, and their paralysis prevents them from using many types of investments. They become singularly focused on access to their money and suspicious of anyone in my profession. Speaking as an insider, they are right to be concerned, but they are hurting themselves more than anyone else if this fear prevents them from investing.

It is not a matter of knowing the answers; it is a matter of knowing the right questions.

The advisor you select is critical to your success. If you select an advisor who is knowledgeable and compatible with you, you can expect them to be willing to help you understand what you need to know before you invest in any product. But not all financial services professionals are advisors, as a matter of fact, most are not. Many are salespeople, hiding behind titles such as financial advisor, investment consultant, vice president–investments, and other equally innocuous, but misleading and legitimate-sounding names. Sometimes salespeople also have the Certified Financial Planner, CFP, which is a very legitimate designation. Always remember that a salesperson with a CFP is a salesperson first!

It is not a matter of knowing the answers; it is a matter of knowing the right questions. I have included several questionnaires in the appendix that will help you. These questionnaires do not require any investment knowledge. You should know exactly how much access you will have to your money. Whenever you are asked to purchase a new investment, use these questions to make sure that you understand what the product will do for you.

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