Chapman Capital Advisors

It happens all too o en in this business. You walk into your Financial Advisor’s o ce for a meeting to review your portfolio, and you leave feeling like he or she just sold you a used car. If you get that feeling, it might be time to look elsewhere for nancial advice.

Products on Wall Street are created for one reason, to make Wall Street money. As investors we need to be aware that this is a common occurrence. We need to be smart about where we invest our money.

Products that are sold with a commission attached almost always come with a catch. I see this all the time. Annuities are almost always the biggest culprit. e sales pitch sounds too good to pass up. You cannot lose is the pitch. However, there is always something in the ne print that outlines the negatives. e positives are in big bold lettering and they are very attractive to the eye. I am here to warn you that the driver to sell these products is a big fat upfront commission to your advisor. e brochure does not disclose the compensation to the advisor. It absolutely should disclose the compensation your advisor receives for selling you this product. It should also outline all the internal fees associated with the product.

All annuities come with a cost. Do not let anyone tell you di erently. is is an inherent aw in most of these products. e expense of owning an annuity can be mind numbing. If you are paying the insurance company 4 percent per year, you are missing out on that return on your investment. I know the promises made by the insurance company sound great, but they come with a cost that will eat up your overall return.

Let’s assume you invest $500,000 in a variable annuity that has a promise to pay you 6 percent for the rest of your life. at sounds great right?

You will get $30,000 a year until you die. However, once you dig deeper you realize the cost of that $30,000 a year is $20,000 in fees. at is not that great a deal is it? is is simple math and most of these products are much more complex than my illustration, but I think you get the point. Nothing is free. Guarantees cost money just like the extended warranty you purchase on a car. e car salesman rarely goes through the warranty with you before you buy it. e car salesman outlines the positives. If he or she outlined the negatives, you probably would not purchase the warranty. e person selling the annuity utilizes the same sales approach. ey will scare you into thinking you need the guarantee when you do not.

My advice to you is to do your homework. Research not only the product, but also the advisor selling it. Work with a Fiduciary and you will not be subject to a sales pitch with a potentially high commission product being sold to you. Fiduciaries work on fees based on assets under management. ey do not get paid commission to sell products to clients.

Fiduciaries build portfolios to meet client needs. ere is zero incentive to sell products with lucrative commissions behind them.

Money Talks

by Jay Chapman, CFP®

All the opinions expressed in this article are that of the authors and should not be considered nancial advice for your individual portfolio.

If you would like to learn more about this topic or have your complimentary portfolio reviewed please contact Jay Chapman, CFP® at Chapman Capital Advisors 772-320-9658 or email Jay@ChapmanCapitalAdvisors.com Charting a Course For Your Future

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