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Author: batdoe Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: My Meeting with the AmEx guy Date: 2/24/2004 10:13 PM
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(cross posted)

So, here's the update on my meeting with the AmEx guy.

First we went through his preliminary financial plan for us, but there were problems. He had college start dates for each of my children of 2007. The oldest of my kids will be 11 in 2007, so we couldn't get to all the bottom line stuff. That was annoying, but in his defense he had to rush his wife to the ER on Friday and one of his daughters has a broken leg. Things are not going well at his house and it's taking up much more of his attention than usual. I can understand this, but I would have preferred he took the time to proofread his work, even if he had to postpone our meeting.

So, we have to fit $1545 into $1000 - that is, we want to allocate $1545 to various objectives but we only have $1000 a month to save and/or invest. We have 13 savings objectives (4 kids in college, 4 bar/bat mitzvahs, one car, one vacation, retirement funding, dh's life insurance and finishing up funding our efund) - he says 13 is a record for him. It seems most of his clients are not so interested in providing for college or other things for their kids and just focus on their retirement. His preliminary advice is to put less into our retirement savings (currently we save 16k per year for retirement - max dh's 401(k) and my Roth) and put more into our other objectives. Even though our retirement looks like it will be more than fully funded at 60 (we run out of money at about age 150) I am uncomfortable with that advice. His next advice is to plan to spend less money on the bar/bat mitzvahs. That is a good plan. We'll make that be the lowest priority for the money and just spend whatever there is when we get there.

Next, life insurance. Thankfully he only brought us quotes for term life and didn't try to sell us anything we didn't want. He brought us quotes for 20 years, but I said I thought we only needed 15. In 15 years I'll only have one kid at home, college funds will be mostly funded and if I run out of the work based life insurance money I can dip into one of the retirement accounts using the substantially equal payment distributions. His suggestion was to buy the 20 year term and stop paying the premiums in 15 years. I told him that was no good because we would wind up spending more money that way. Why pay the premiums for a 20 year term ($1330 a year)for 15 years when we could pay the 15 year term premiums for 15 years ($935 a year).

We talked about rolling over one of dh's 401(k) plans into AmEx funds and he asked if we had any questions. Little did he know...

I said "I have some concerns about these funds you are putting my husband's money in." He was surprised and a bit flustered. I went on to say "This one, well, it's just a dog." He said "Well, well, uh, what do you mean?" I said "Well, for instance, this fund has a Morningstar rating of two stars and has low return and above average risk. Why would you want to put his money into there?"

We talked about the next one that I didn't like and he got more flustered, started mangling a paperclip and was basically not prepared for my questions. One of the funds is a small company index that tracks the S&P SmallCap 600. It does a good job of it, but its expense ratio is .98%, whereas the ETF for the S&P SmallCap 600 that I looked into has an expense ratio of .20%. I asked him why we should pay 5 times the fees just to be in an AmEx fund. He said if we wanted to buy the ETF we could set up a brokerage account with him, but he wasn't very enthusiastic about it. I asked him if there were other expenses that were not reflected in the expense ratio that we should account for, hoping he could justify the AmEx fund in some way, but he just said there were other fees but didn't get into any specifics. I suspect it is because he didn't know. I had to ask him twice what fees a brokerage account would charge - $19.95 for an online transaction and about $50 to call him and have him do a trade for us. He said that of the $50 charge, he makes $2 so it's not the way he wants to go with his clients.

Another problem I have is that he is buying Class B shares to avoid the 5.75% front load. They convert to A shares in 6 years. Class B shares earn about 1% less than the class A shares. Only because we asked did he tell us that's because there are more fees involved in the class B shares. This had me do a doubletake. I am certain he did not mention this on our first meeting. We either pay more fees every year for 6 years or a front load. It seems to me that either way we loose.

So, all in all, I am tremendously underwhelmed with the quality of advice so far. I'm not a trained financial professional, and without knocking myself (because I am quite bright and all) I am just a housewife but I made my financial guy flustered by asking what I thought were obvious questions.

And the best news yet - dh is impressed with me. He says that perhaps I should manage our money instead. Now, he's impressed with me in general but he sees that I am right on the ball here with the whole financial thing, suggesting less expensive options, asking good questions and basically knowing my stuff. I told him the only thing is that I don't have any proven track record. He's going to get some specific numbers from the yahoo who recommended this guy to us. If the AmEx guy made dh's friend a boatload of money (not sure exactly what % to say is a boatload, but I'll work that out tonight)then maybe I'll reconsider. If not, then I'll start making plans to take over our finances.

All in all, a productive meeting, just not so good for the AmEx guy.

Thaks to everyone who encouraged me and gave me good advice!

Lisa
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Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39414 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 1:08 AM
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The insurance salesman is right. If you're smart enough to see through his high fee financial products, you're smart enough to invest on your own. You can learn 90% of what there is to know about investing in 15 seconds:

"Earn consistently, save as much as possible, max out your retirement plans, and invest in low fee index funds"

And the other stuff, like the best college retirement plans, you can buy a book and read up on.

Nick


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Author: Belgoboy Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39422 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 3:12 AM
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Hi Lisa

I haven't done it myself but you might be much better of looking for a fee only financial advisor (though I have thought of joing Amex for the same reasons). Here is the site so you can hopefully scout some out in your area. They dont' have anything to sell, beyond the obvious yearly fee or commission, and I personally value that much more than your Amex guy who will be putting you into Amex funds that usually always underperform the market.

http://www.napfa.org/

http://www.napfa.org/ConsumerServices/find_a_planner.htm

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Author: SuaSponteMark Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39424 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 7:45 AM
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Lisa,

Great insight into AmEx. I called them once in about 1998 when I knew much less than I did now, but something still didn't seem right. In the intervening years, I've realized they are essentially salesmen, and you've yet again validated this.

I would contend that any financial planner who is not independant and not fee based is rarely a good fit for anyone. Your AmEx (or Morgan Stanley or similar) planner is going to steer you towards their products, regardless of whether they are financially solvent or sensible. A planner who charges a percentile of the assets you invest or of your account balance on an annual basis has a not-so-subtle motivation to get you to invest money you really need to be applying towards debt or something else that doesn't involve a cut for them.

Mark

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Author: batdoe Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39425 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 8:21 AM
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Hi Mark,

This financial plan he is working up for us is a "fee only" plan. At the outset I decided that if I didn't like the plan, I would just take the good advice (hoping there would be some in there, somewhere) and do it myself. Thankfully, we are not obligated to follow his advice in any way, and having paid him $400 for this will make it very easy for me to just walk away.

Lisa

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39426 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 9:15 AM
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This financial plan he is working up for us is a "fee only" plan.

It can not be a "fee-only" plan if there are B shares in the plan.

having paid him $400 for this will make it very easy for me to just walk away.

On the other hand you could follow Mark's advice and find a NAPFA planner who works by the hour. Three to four hours of useful advice, not a sales oriented pitch.

buzman

Member, NAPFA
Member, Garrett Planning Network



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Author: batdoe Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39428 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 9:35 AM
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Hi Buzzman,

What I mean by it is a fee only plan is the paper plan he is coming up with was for a flat fee of $400. What we do after that is our own choice and there will be other fees associated with that.

Lisa

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Author: billjam Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39431 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 11:16 AM
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"What I mean by it is a fee only plan is the paper plan he is coming up with was for a flat fee of $400. What we do after that is our own choice and there will be other fees associated with that."

Sounds like you're smart and have figured out that you are not necessarily getting objective advice from this guy. Afterall, he does work for a company that stands to make a nice profit by selling you products. Even though you are not required to buy AmEx products, you might still benefit from a review by someone who has nothing to sell you. Since you are already in for $400, you'll have to decide whether you want to commit any more $ to planning. Depends a lot on what % of your portfolio you are talking about. I wouldn't spend any more for a $10,000 portfolio but for a $1 million portfolio I'd pay for an unbiased opinion.



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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39432 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 11:32 AM
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<< I wouldn't spend any more for a $10,000 portfolio but for a $1 million portfolio I'd pay for an unbiased opinion. >>

Unfortunately, there is no such thing as an "unbiased opinion." ;-)



Truth is absolute until spoken.
TTR


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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39433 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 12:54 PM
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I don't believe I've ever seen anybody write that they had a positive experience with an AMEX financial advisor.

intercst

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Author: TennisVenus Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39435 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 1:34 PM
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<<I don't believe I've ever seen anybody write that they had a positive experience with an AMEX financial advisor.>>

Now why am I not at all surprised?

I began the interview process to become an AMEX financial advisor. For anyone who has never gone that route, here is some valuable information: you will find ads for AMEX financial advisor in the "sales" section of the classified.

AMEX goes through a boring, grueling, and totally worthless process to find their financial advisors. First, they give you a generic computer test, which asks really dumb questions over and over again like, "Do you like to tool around with your car?" I assumed they were checking consistency and honesty, but who the heck knows. (There were also questions like, "Have you ever lied to anyone?" Yeah, like who hasn't told their parents a little white lie in their life?)

When you pass that test -- and only a sociopath or Al Quaida recruit would not -- you are invited back for part 2 of the interview process, the lecture. The lecture begins all fine and well, until the moment of truth. And that moment begins, "People, this is a sales job! If you want to succeed, you need to learn how to sell." Then, instead of spending time telling you the things you'll learn to help people, they tell you about their commission schedules, and how many years it takes to earn $$$, etc.

As for the candidates that were in the room with me -- they were from all walks of life, including former maintenance men, recent college grads with no particular ambition, car salesmen looking for a more formidable line of work, etc. And there was no apparent interest on the leader's part to separate the serious from the desperate. At least not for the first two phases of the recruiting process.

The next step was a one-on-one interview, which I suppose narrowed down the candidates. Fortunately for me, other opportunities opened up, and I never pursued the position further.

However, this should give you some idea of the talent pool from which they recruit.

And one last thing ... if you paid him $400, he should at least rerun the correct numbers in the financial plan regarding the college start years for your kids. Geez!

Barbara



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Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39436 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 3:59 PM
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I'm not sure why AmEx doesn't just streamline their recruitment process to a single Yes/No question:

"Can you move product to people who know even less about investing than you do?"

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Author: mberan One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39437 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 5:10 PM
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I have had nothing but positives working with my AmEx guy. I originally was moving overseas and sold my house. I worked with him on investment of the proceeds, and did quite well. I have worked with him now for several years and he does due diligence in finding investment options that suit my investment strategies.
Thought I'd put in one positive.

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Author: telegraph Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39440 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 5:56 PM
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I have had nothing but positives working with my AmEx guy. I originally was moving overseas and sold my house. I worked with him on investment of the proceeds, and did quite well. I have worked with him now for several years and he does due diligence in finding investment options that suit my investment strategies.
Thought I'd put in one positive


Ah, but the question is how much BETTER could you have done if you didn't pay him 5% in commissions, plus annual expenses of 1 or 2% above index funds.

Everyone did well through the 1990s!

Maybe you could have 30% more in your nest egg now?


T.



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Author: MurrayS Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39441 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 7:08 PM
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I agree with your husband, you should manage your money. It wouldn't hurt to talk to a investment advisor, but I think you have your financial plan in pretty good shape.

Just for fun, here is the exchange I had with my life insurance salesman a few years ago:

Insurance Salesman "...and we recommend that you get insurance equal to 6 times your salary which, according to what you've told me, is X."

Me "That seems a bit high."

IS "Well, you want to care for your loved ones, don't you?"

Me "Yes I do. Just out of curiosity, how much insurance would you say Bill Gates needs."

IS "Bill Gates? He doesn't need life insurance!!"

Me "Why not?"

IS "Because he has a net worth in the billions!"

Me "You never asked what my net worth was, did you?"

IS silence


Of course I'm not worth billions, but just the same, insurance salesmen aren't trained to sell you what you need, they try to sell you more than you need.

-murray

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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39442 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 7:47 PM
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<< Of course I'm not worth billions, but just the same, insurance salesmen aren't trained to sell you what you need, they try to sell you more than you need. >>

This is simply and completely a false blanket statement.

I've been in the insurance industry for almost 30 years and have never in all the training classes I've had to attend seen or experienced that kind of training. Though I have seen training for methods that were too aggressive with tax law and/or not ethical and not acceptable to me.

As for as the anecdote mentioning how a billionaire like Gates not “needing” life insurance . . .I think of someone like Malcolm Forbs. The facts are, he owned millions of whole life insurance and was in the process of buying some more at the time of his death. Did he have a team of competent expert financial advisors go over such “needs?” I would suggest he did!

Also, any agent who is selling life insurance without some idea as to what a person's net worth is, is a very inept insurance agent or maybe among the minority who tend to be transactional based as opposed to service based. And if anyone hasn't figured it out yet, not all agents are the same nor run their businesses the same. There are the good and the bad just as there are in any industry.


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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39443 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 7:58 PM
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<< Everyone did well through the 1990s!

Maybe you could have 30% more in your nest egg now?
>>

On the other side of the same coin, maybe there could have been 30% less in that nest egg too. . . ???

Ahhh, nothing like an uplifting comment on a positive experience offered. Is it any wonder people tend to not offer positive experiences? When one offers a positive experience then gets slapped in the face . . . it's not a good feeing of wanting to come back for more.


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Author: MurrayS Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39444 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 8:15 PM
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I've been in the insurance industry for almost 30 years and have never in all the training classes I've had to attend seen or experienced that kind of training.

My apologies. My statement was too harsh and off base.

I think of someone like Malcolm Forbs. The facts are, he owned millions of whole life insurance and was in the process of buying some more at the time of his death

I don't know his situation, but if I had millions in assets and no debt, I can't think of a reason I would need life insurance. Perhaps you can elaborate. I don't feel the need to make my child rich as a result of my death.

On the other side of the same coin, maybe there could have been 30% less in that nest egg too. . . ???

To say one does "well" means nothing to me. If the long term portion of the portfolio consistently beat the S&P, I would be impressed. Otherwise, you would be wasting your time and money.

-murray

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Author: ribbs123 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39445 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 8:26 PM
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I don't know his situation, but if I had millions in assets and no debt, I can't think of a reason I would need life insurance. Perhaps you can elaborate. I don't feel the need to make my child rich as a result of my death.


Some people use life insurance to handle estate taxes. (They die and the money from the insurance pays the taxes on their estate.) Essentially they are prepaying the tax with their insurance premiums.

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Author: telegraph Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39446 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 8:40 PM
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On the other side of the same coin, maybe there could have been 30% less in that nest egg too. . . ???

Ahhh, nothing like an uplifting comment on a positive experience offered. Is it any wonder people tend to not offer positive experiences? When one offers a positive experience then gets slapped in the face . . . it's not a good feeing of wanting to come back for more


It's really simple to test...

If you had put that money into index funds with Vanguard, would you be ahead or behind of where you are today?

LOts of funds paid capital gains taxes on their distributions in taxable accounts, and you have to count that 'drag' on the results too....

Seeing that just about every study I've seen shows that with a 5% upfront load, and a 1.5% higher yearly load, the results will show 30 to 50% less after 30-40 years of compounding, I'd suggest he could have done better....

simple test....

and there is always the future, and everyone else to consider.....

t.



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Author: telegraph Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39447 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 8:45 PM
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marray: I don't know his situation, but if I had millions in assets and no debt, I can't think of a reason I would need life insurance. Perhaps you can elaborate. I don't feel the need to make my child rich as a result of my death.

with the current and former estate tax laws, using life insurance as a way to get around the tax man is quite common for folks with high wealth (ah, wherever there is a tax to pay, there are tax lawyers helping you legally avoid those taxes!...).

YOu buy life insurance (which is likely to be very high priced), which is NOT part of your estate when you die...it pays the beneficiary directly......and tax free....and you play games with how you fund that life insurance so the benefits are taxable...thus, it is an expensive way to get around the tax man....but paying 55% estate tax is even more expensive!......

If you have 100 million to get around the tax man at your death, rather than pay 55 million in estate tax, you can afford all sorts of lawyers and expensive solutions to avoid paying 55 million.

It is quite common as part of estate planning....to avoid estate taxes...

BUt you need tens of millions to really get to use it....

if you only have a million or two, or only want to leave it to your spouse (not kids and others), not a problem. But then the spouse has the problem....and who knows who dies first, and how soon after the other?

t.



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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39449 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 11:17 PM
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telegraph writes:

<< with the current and former estate tax laws, using life insurance as a way to get around the tax man is quite common for folks with high wealth (ah, wherever there is a tax to pay, there are tax lawyers helping you legally avoid those taxes!...). >>

Other than the fact that buying life insurance doesn't get you “around the tax man” for estate tax purposes . . .it's only a way to pay the taxes in a leveraged way, this is quite correct and I might add that it's perfectly ethical and legal to “avoid” as much tax as one can legally do.

<< YOu buy life insurance (which is likely to be very high priced), which is NOT part of your estate when you die...it pays the beneficiary directly......and tax free....and you play games with how you fund that life insurance so the benefits are taxable...thus, it is an expensive way to get around the tax man....but paying 55% estate tax is even more expensive!...... >>

If we accept the premise that the life insurance is “expensive” . . .so what? If the end result is a lot more of that hard earned wealth being transferred to one's heirs as one might what . . .who cares?

<< If you have 100 million to get around the tax man at your death, rather than pay 55 million in estate tax, you can afford all sorts of lawyers and expensive solutions to avoid paying 55 million. >>

On a much smaller scale, people can have the same kind of issues, problems and solutions.

<< It is quite common as part of estate planning....to avoid estate taxes...

BUt you need tens of millions to really get to use it....
>>

It's only takes a couple of million to have an estate tax problem. As it becomes less and less of a problem into the year 2010, it'll really be interesting to see just where our government is going to go from there.


<< if you only have a million or two, or only want to leave it to your spouse (not kids and others), not a problem. But then the spouse has the problem....and who knows who dies first, and how soon after the other? >>

This to me seems a myopic view in that just how people might have a million or two is not always the same (in cash as suggested). Some people have their million or two tied up in things that are not so liquid (e.g. a business, a farm, real estate, etc. for example). As I've mentioned before, it all depends on the set of issues that exist and then to build plans for the what-ifs since one doesn't know just who might die first or when.


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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39450 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 11:22 PM
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<< It's really simple to test...

If you had put that money into index funds with Vanguard, would you be ahead or behind of where you are today?
>>

But not everybody has the risk tolerance to put all there money at such risk. So they may have a very different asset allocation. We don't know what this person's risk tolerance is nor just how they invested. For all we know they DID use an index fund to some extent. Right?


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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39451 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/25/2004 11:44 PM
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MurrayS, you asked:

<< My apologies. My statement was too harsh and off base. >>

Accepted. I know how many people feel about those kinds of things and such statements are usually based on those feeling more than facts. So, I understand. As I often do, I try to offer some balance to unbalanced statements.

<< I don't know his situation, but if I had millions in assets and no debt, I can't think of a reason I would need life insurance. Perhaps you can elaborate. I don't feel the need to make my child rich as a result of my death. >>

I don't know the specifics of what Malcolm was trying to do and I'm sure there were a lot of complicated issues in his case. And it's rarely a case of (I've never heard of one nor experienced one) buying life insurance to make a child or children rich. It's usually to either preserve the value that has been worked so hard for and/or to be able to distribute the assets equitably.

For example, on a basic level the problem some business owners have is there may be two children where one child is very interested in continuing the business and the other has no interest in the business. How to you divide a business equally without destroying the business. Well, life insurance can be a good equalizer. The one child can take the cash and the other take the business and have it in tact. Very similar issues often exist in extended family situations where you have children from different spouses. Sometimes cash is the only way to equalize things this there are assets that can be a problem in dividing. And Life insurance does what it's designed to do . . .to provide immediate cash at the death of the insured.

<< To say one does "well" means nothing to me. >> If the long term portion of the portfolio consistently beat the S&P, I would be impressed. Otherwise, you would be wasting your time and money. >>

I agree, “well” doesn't say much. But “well” could still be very good even though it may perform less that the S&P since not everyone has the risk tolerance to have a total portfolio that can equal it or do better. And since they don't have that kind of risk tolerance, they can sleep better at night knowing that something less than the S&P is good enough.


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Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39452 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 12:09 AM
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>>If you had put that money into index funds with Vanguard, would you be ahead or behind of where you are today?

>But not everybody has the risk tolerance to put all there money at such risk.

There's always a comeback, isn't there? Always a reason why one should buy more insurance products. That's the mark of a good insurance salesman I guess.

Nick






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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39453 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 1:08 AM
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I think of someone like Malcolm Forbs. The facts are, he owned millions of whole life insurance and was in the process of buying some more at the time of his death

I've always wondered about that. Without question, life insurance is a good deal if you die young, but what about if you live to be 90? What's the annual premium for a 90-year-old with a $100 million life insurance policy? I'll bet its $10 million/year.

intercst



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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39455 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 3:11 AM
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<< >But not everybody has the risk tolerance to put all there money at such risk.

There's always a comeback, isn't there? >>

A "comeback"??? I'm only trying to look at this from a point of reason. Is what I said true or not? If not, why not?

<< Always a reason why one should buy more insurance products. >>

No. I don't agree with this statement. Insurance products are products to help minimize risk and provide guarantees. Life insurance is unique of all insurances since it's the only insurance that insures against an event that is sure to occur. If any of the products are useful, use them . . .if not, don't.

<< That's the mark of a good insurance salesman I guess. >>

Hmmmm??? I guess I'll take that as a terrific compliment? ;-)

If there were balance and/or truth in the posts I've responded to, there would be little if anything to make “comebacks” on. I'm all for opinions on issues of insurance. But if they're factually wrong, I feel compelled to point out where that is . . . . especially in a forum where it's so biased in one direction. I know it's not a popular position to take around here, but I don't care since I've been around long enough and have become knowledgeable enough to know a lot about insurance and the industry. I know I'm not the smartest person around, but I do know what I don't know and very willing to acknowledge that.


Truth is absolute until spoken.
TTR

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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39456 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 3:36 AM
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intercst,

<< I've always wondered about that. Without question, life insurance is a good deal if you die young, but what about if you live to be 90? What's the annual premium for a 90-year-old with a $100 million life insurance policy? I'll bet its $10 million/year. >>

Well, I suppose that would depend on the 90 yr old's health and just what type of policy is being purchased . . . . if a 90 yr old could get it at all. Not all life insurance companies will issue a policy to someone that age. And certainly, no one issues term insurance to someone that age. Some companies will issue permanent policies close to that age.

If a mutual company were to issue a participating Whole Life policy of that size, I would expect the annual premium to be in the neighborhood of around $25 million/yr. And though the policy might start out at $100 million, the death benefit could grow to something like $350 million in 10 years (and remember, that's federal income tax free to the beneficiary(s)).

Oh, and if you're wondering about the commissions an agent might make on such a sale . . . .the percentage is drastically reduced due to the size of the policy (maybe less than 1%), but that's still a nice paycheck, huh? ;-)


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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39457 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 8:25 AM
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TTRoberts writes,

<< I've always wondered about that. Without question, life insurance is a good deal if you die young, but what about if you live to be 90? What's the annual premium for a 90-year-old with a $100 million life insurance policy? I'll bet its $10 million/year. >>

Well, I suppose that would depend on the 90 yr old's health and just what type of policy is being purchased . . . . if a 90 yr old could get it at all. Not all life insurance companies will issue a policy to someone that age. And certainly, no one issues term insurance to someone that age. Some companies will issue permanent policies close to that age.

If a mutual company were to issue a participating Whole Life policy of that size, I would expect the annual premium to be in the neighborhood of around $25 million/yr. And though the policy might start out at $100 million, the death benefit could grow to something like $350 million in 10 years (and remember, that's federal income tax free to the beneficiary(s)).


Would that be a $25 million/year level premium, or would it grow to $50 million/year or more if the guy lived to be 100?

intercst



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Author: MurrayS Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39458 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 9:31 AM
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And since they don't have that kind of risk tolerance, they can sleep better at night knowing that something less than the S&P is good enough.

You are correct, of course. In response to the original post, a good, straight fee investment advisor could probably recommend mutual funds with the same investment strategy, risk tolerance and lower fees/loads than the recommendations of the AmEx agent.

Paying a load or higher fees puts you at an immediate disadvantage. For a $10,000 investment over 10 years earning 10% per year, a 5% load will cost you nearly $1300 in return! For someone like batdoe who is willing to do some learning and research, I believe they would be better off (get more return) looking elsewhere for investment advice.

-murray


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Author: billjam Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39459 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 9:48 AM
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I assume Forbes had insurance to help his family pay estate taxes. Heaven knows, Steve Forbes was going to need all the financial help he could get. I wonder if Malcolm was paying the premium himself or figured a way to have the business pay it. I'd bet on the latter.


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Author: telegraph Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39460 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 10:19 AM
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<< >But not everybody has the risk tolerance to put all there money at such risk.

There's always a comeback, isn't there? >>


Vanguard offers EQUIVALENT products to just about any 'risk tolerance' including bond funds, muni bond funds, stable value funds, money market funds....

So you are just doing the 'salesman' scare tactic thing again......

Money at risk? Yes, sticking it in an underperforming investment for 30 or 40 years, and losing out on 50% gain on the total amount is putting your money at risk. Risk of poor return.

t

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Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39462 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 10:39 AM
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Vanguard offers EQUIVALENT products to just about any 'risk tolerance' including bond funds, muni bond funds, stable value funds, money market funds....

So you are just doing the 'salesman' scare tactic thing again......


What I've learned from these poster's replies over the past few weeks is that there's simply no arguing with insurance salesmen. They are trained, perhaps from birth, to have a response to any possible objection you might have to buying insurance products.

Nick




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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39463 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 10:48 AM
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intercst,

<< Would that be a $25 million/year level premium, or would it grow to $50 million/year or more if the guy lived to be 100? >>

That's based on a guaranteed level premium.


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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39465 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 11:09 AM
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billjam, you wrote:

<< I assume Forbes had insurance to help his family pay estate taxes. >>

As I said, I don't know any of the details, but I highly suspect that was a big part of it if not all of it.

<< Heaven knows, Steve Forbes was going to need all the financial help he could get. I wonder if Malcolm was paying the premium himself or figured a way to have the business pay it. I'd bet on the latter. >>

There very well could have been some kind of play (maybe on a split-dollar arrangement of some kind) where the business was involved all right. The key would have been go be sure that the business wasn't actually paying for the pure insurance part of the premium, else the death benefit would be completely income taxable.

But as I recall, there seemed to be some other issues concerning equitable distributions of his assets too, which would seem logical to me also. It would be interesting to know just exactly what some of those details were.



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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39466 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 11:29 AM
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<< Vanguard offers EQUIVALENT products to just about any 'risk tolerance' including bond funds, muni bond funds, stable value funds, money market funds.... >>

Yes they do . . .

<< So you are just doing the 'salesman' scare tactic thing again...... >>

Hmmm??? What scare tactic? Where in any of my posts have I ever used a scare tactic (and you may go back over the years of my postings)? I don't use scare tactics; it's not my style.

Since I originally came from an engineering background, I continue to like to look at a set of problems and find solutions to those sets of problems. And in a sales situation, I like to present more than one solution . . .some of them often being exactly what's recommended around here (e.g. the “buy term and invest the difference” kind of thing). It's just that I don't believe in one solution to all the problems. I believe in looking closely at the set of solutions first, and then determine what solutions might best be used.

<< Money at risk? Yes, sticking it in an underperforming investment for 30 or 40 years, and losing out on 50% gain on the total amount is putting your money at risk. Risk of poor return. >>

I agree. But I'm sure where we part company is how we define "underperforming investment."


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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39467 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 11:44 AM
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Nick,

<< What I've learned from these poster's replies over the past few weeks is that there's simply no arguing with insurance salesmen. They are trained, perhaps from birth, to have a response to any possible objection you might have to buying insurance products. >>

LOL

Nah . . .not trained, just a natural talent.

Maybe that's what some of those pre-employment tests are looking for when someone is first entering the business???

Hmmmm??? I hate to see the white flag go up this way. If there are good sound arguments against anything I might say, I love to hear them. I may be a little on the over-the-hill side, but I still do love to learn new things.

Sincerely,

Ted




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Author: telegraph Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39472 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 12:46 PM
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Hmmm??? What scare tactic? Where in any of my posts have I ever used a scare tactic (and you may go back over the years of my postings)? I don't use scare tactics; it's not my style.


Oh, come on...I suggested Vanguard funds, and the first thing you replied is 'some people don't have the risk tolerance for STOCKS'.

I never said buy ALL stocks.

You can simply buy the same mix you would have bought from your
insurance salesman, and make a lot more money in the process, maybe hundreds of thousands extra, rather than paying high up front fees and high annuall expenses in most plans.

Sorry, you might wish to review your posts, but the tone was 'oh, those poor investors, let ME invest your money SAFELY in high commission, high cost products, and you'll do "OK"'......

My advice...talk to some 'free' financial planners...listen to their plans and ideas from the inputs you give them.....talk to several.....when they come back with their computer generated output (and oh, is it impressive - 20-30 pages of charts and graphs showing projected performance, breakdown year by year, listing your assets/investments, etc......(takes about 20 minutes to enter your data into the computer for a slow person, then 20 milliseconds to calcalate and a few minutes to print....been there..done that through the Prudential training program...afterwards I decided I really didn't want to con my friends and associates into their products, primarily high cost life insurance/variable annuity products, and high cost mutual funds)......

THen take their advice, and buy into similar better performing lower cost no load Vanguard funds in about the same mix.

You don't buy a car from every salesroom you visit while shopping for a car....I see no reason why you have to 'decide' to buy from a particular salesman if he/she can't show that tthe funds and their fees are not only "almost competitive", but WILL BEAT the no-fee no-load funds of similar nature/mix.

t.

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Author: situate One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39474 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 1:22 PM
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And I thought my troubles in this regard were unique.

My wife and I first met with a rep from AmEx almost exactly ten years ago after he'd been recommended to us by some friends. We were ultimately very surprised at the recommendation because a more rude, pushy individual cannot be imagined.

We were brand new to investing at the time and so bought some IDS mutual funds. They were dogs and we got rid of them pretty quickly. When I called him up to tell him of our decision, he accused me of jeopardizing our children's college education. He didn't change my mind.

We still have life insurance and health insurance policies with American Express, and my wife has a TSA with them (to which she stopped contributing years ago). These seem harmless.

BTW--a few years ago, AmEx assigned us a new rep. Somehow, word had gotten out that we weren't a good fit with the original rep.

Lessons learned: AmEx mutual funds are pretty poor; the company's reps are worse.

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Author: situate One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39475 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 1:27 PM
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Addendum:

At a subsequent meeting, the agent needed my help in reading the insurance policy he'd "prepared." He also had grieveously miscalculated the pensions we'll receive at retirement, thus throwing the 403(b) figures way out of whack.

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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39479 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 2:01 PM
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<< Oh, come on...I suggested Vanguard funds, and the first thing you replied is 'some people don't have the risk tolerance for STOCKS'. >>

While this is also a true statement, this is NOT what I said. Perhaps the following link will help your memory???

http://boards.fool.com/Message.asp?mid=20387805

<< I never said buy ALL stocks. >>

I know that. But since you didn't know what the asset allocation was (nor any of us did) and then proceeded to imply that investing in index funds would or could have done better. We just don't know how well they did . . .only that it's stated that they did “well” through their particular advisor at AmEx.


<< Sorry, you might wish to review your posts, but the tone was 'oh, those poor investors, let ME invest your money SAFELY in high commission, high cost products, and you'll do "OK"'...... >>

Fascinating! I can understand how this might be seen this way through the eyes of a cynic.

The only “tones” I hope to convey are those that have to do with balance, fairness, caring and open-mindedness.


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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39481 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 4:13 PM
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<< Sorry, you might wish to review your posts, but the tone was 'oh, those poor investors, let ME invest your money SAFELY in high commission, high cost products, and you'll do "OK"'...... >>

Fascinating! I can understand how this might be seen this way through the eyes of a cynic.


Look, I'm not bashing financial advisors and the like (particularly since I spent many years in one of the more bashable professions), but financial advisors are a waste of money and time. Anyone with sufficient intelligence to read simple magazines can do as well or better than they otherwise would have done with so-called professional advice. Folks who aren't able to read usually don't have enough money to interest finacial advisors in the first place. Folks who are too old to know any better make the best custormers, of course, since they are suckers waiting to be sucked dry of funds. This is why the adult children of the elderly should take a more active role in helping their aging parents invest wisely.



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Author: jesserivera67 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39486 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 10:03 PM
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I'm posting rather late on this one it seems but I would highly recommend you review the "parents burned" threads...

http://boards.fool.com/Message.asp?mid=19550927&sort=whole#19563147

Perhaps not everyone at Amex is bad but I am in a legal battle with Amex over the surrender fees associated with my parents accounts. I have over 4 inches thick of documentation associated with them and am getting ready to file everything with the NAIC, NASD, and SEC as well as our attorney.

Here's the class action lawsuit being drawn against Amex because of "questionable" practices let by attorney Jon Drucker.

http://www.amexsux.com/complaintAEFA.pdf

I can't emphasize enough and recommend that you do take over the finances. The initial setup may be hard but after that you pretty much just let it ride and rebalance every year or so. It's just not hard. So my advice is to TAKE OVER THOSE FINANCES! YOU DON'T NEED NO STINKING PLANNER!

A decent book and overview for you and can be read in an afternoon or two. First chapter: FIRE YOUR FINANCIAL ADVISOR!

http://www.amazon.com/exec/obidos/tg/detail/-/0393058549/qid=1077850911/sr=1-2/ref=sr_1_2/002-3776376-4648840?v=glance&s=books


Here's another article that might interest you as well. It's from February 9th's wall street journal:

Financial Plans: Selling
For In-House Gains?
By RUTH SIMON
Staff Reporter of THE WALL STREET JOURNAL
John Haritos Jr. was looking to cut his tax bills and save for retirement when he agreed to a free financial consultation with American Express Financial Advisors. Told his finances wouldn't allow him to meet his retirement goals, Mr. Haritos, 37 years old, paid $500 in July 2000 for a financial plan. Recalls Mr. Haritos: "I figured I was paying for ... unbiased advice."

He now says he figured wrong.

What did Mr. Haritos get? A laundry list of American Express products he should buy. So he moved $26,000 from a money-market fund into a brokerage account that charged a flat 1.5% a year and invested largely in high-fee mutual funds. He also transferred his $4,000 individual retirement account to American Express and rolled a life-insurance policy into an annuity run by IDS, also a unit of American Express Co. Nearly all of the investments, which generated high fees for AmEx and its advisers, fared poorly.

Mr. Haritos soon cashed out and sued the firm. American Express is contesting the charges, saying in filings with a federal court in Arizona that the written disclosures to clients "are more than enough to constitute 'storm warnings' that the Financial Plans may not be as 'objective' or 'unbiased' as supposedly represented."
Financial plans have exploded in popularity in recent years as brokers, insurance agents and other financial advisers have touted their benefits. Roughly 9.5 million households obtained a financial plan from mid-2000 to mid-2002, up from 6.6 million in a 1998 survey, according to SRI Consulting Business Intelligence, a research and consulting firm based in Menlo Park, Calif. Another 6.6 million received a retirement plan, the survey found.

Investors who sign up for financial plans believe they are getting independent advice tailored to their own needs. But in one of several "open secrets" that have been hazards for investors in this era, these plans often are little more than sales tools that stand a better chance of making money for advisers and their firm than their clients.
Critics say advisers rarely disclose that they get big bucks for directing investors to insurance products and mutual funds that provide the highest payouts, rather than offering investments that may pay the adviser less but are better-suited to the client's needs. Any information about potential conflicts is often vague at best and tucked into documents provided to investors when they are already well into the planning process.

A good financial plan can be useful to chart an investor's future, of course. But "for a number of advisers it is a marketing hook," says Matthew McGinness, an associate director with Cerulli Associates, a market-research firm.

Many financial firms that provide such plans also offer proprietary, or in-house, financial products. The potential for conflicts at American Express is intense because of its large stable of in-house mutual funds and insurance products. Proprietary products account for roughly 65% of adviser sales at AmEx, a regulatory filing says.
Many AmEx funds have been poor performers. Over the past three and five years, AmEx funds have, on average, ranked in the bottom third of all fund families, according to fund-tracker Morningstar, Inc. And AmEx receives special revenue-sharing payments from 11 outside fund families -- including AIM, Putnam, Strong and Van Kampen.

An American Express spokesman says the company has been overhauling its fund operation in the past two years in an effort to boost returns. "We are absolutely committed to improving our performance," he says. Though fund performance has improved, AmEx funds still ranked in the bottom half of all fund families in the past 12 months, according to Morningstar.

American Express Financial Advisors carries a lower profile than the firm's credit-card business, yet it accounted for roughly 24% of American Express's $26 billion in revenue and 22% of its net income last year. Fees from financial plans and other advice services accounted for just $121 million of the unit's $6.2 billion in revenue last year, according to regulatory filings. But the importance of planning to AmEx and the firm's more than 12,000 advisers is far greater: Three-quarters of total sales were generated by financial plans and advice services.
Financial advisers use the planning process to draw clients in, but they depend on product sales for their livelihood, current and former advisers say. "The financial plan is their big claim to fame. But if that's all you did, you'd starve to death," says Judy Reed, an adviser who left American Express in early 2002 after more than a decade with the company. Other former AmEx advisers say that when they presented a financial plan, they dubbed it "The Close," because of its usefulness in selling high-fee products, including proprietary funds and insurance that paid more to the salesmen -- and to the firm.

An AmEx spokesman says "financial planning is at the core of what we do" and is "the best way to serve the needs of our clients," adding that the firm's approach to financial planning is "comprehensive." While many clients buy financial plans from AmEx and then use the firm to follow its recommendations, others pay for plans and implement the suggestions elsewhere or simply buy products from the firm, the spokesman says. "It's not one size fits all."

In some cases, the pressure to sell in-house products is overt. Peggy Bigelow, a financial adviser who left American Express in 2001 after a year with the firm, says she was repeatedly criticized for recommending that her clients invest in outside mutual funds. Other former advisers say the training they received focused largely on sales techniques and the company's proprietary insurance products.

Mr. Haritos, a medical-equipment salesman in Mesa, Ariz., says he learned this lesson the hard way. When he discovered in 2001 that the investments recommended by his adviser were faring poorly, he closed the brokerage account, at a loss of roughly $14,000, or about 35% of his total investment, and moved his IRA to Charles Schwab Corp. He's still holding the annuity, however, because he doesn't want to pay a costly surrender charge.

His suit, filed in October seeking class-action status, requests the refund of all financial-planning fees plus interest, according to Jon E. Drucker, Mr. Haritos's lawyer. Mr. Haritos says his AmEx adviser, Michael Vukonich, never told him he had financial incentives for recommending AmEx proprietary products, rather than outside investments offered by other companies. Mr. Vukonich declined to comment.
Other investors say they were directed to the firm's in-house mutual funds and other proprietary investments. Pierre Gangloff, a software engineer in Boston, says he was looking for tax and investment advice when he paid $600 for a financial consultation in 2002. Mr. Gangloff says his adviser persuaded him to invest a total of more than $17,000 in a dozen different AmEx mutual funds. Mr. Gangloff also invested $500 a month in an IDS variable universal life policy and moved $8,000 from a money-market account to a less-liquid AmEx Market Strategy Certificate -- a certificate of deposit tied to the Standard & Poor's 500. "I had the impression I would be ... hiring some professional ... who would work for me to figure out the best alternatives," he says. "But they were really pushing the American Express brand."

Some AmEx customers say they didn't learn about the potential conflicts until they were well into the planning process. Douglas Parker, a computer programmer in Baltimore, paid AmEx $450 for a financial plan in 2001. Mr. Parker says his AmEx adviser then sold him disability insurance, term insurance and two variable universal life-insurance policies run by IDS. Mr. Parker also rolled over $34,000 from three retirement accounts at Charles Schwab, T. Rowe Price Group Inc. and TIAA-CREF into AmEx annuities and an AmEx brokerage account that included investments in proprietary mutual funds. Mr. Parker says he didn't receive any papers indicating that the adviser might have a conflict until after he had signed the planning agreement and rollover papers.

Says Mr. Parker: "They manage to get control of your funds before you know it."

I'm taking responsibility over there accounts now and I found something out that I had not anticipated as I too was on the hunt for a financial advisor...it's not that hard. It really isn't.



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Author: Mark0Young Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39487 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 11:22 PM
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But since you didn't know what the asset allocation was (nor any of us did) and then proceeded to imply that investing in index funds would or could have done better.

Are you equating index funds to stock index funds? Vanguard offers a variety of index funds, not just US stock index funds, but also a REIT index fund, various international index funds, balanced index funds, targeted retirement index funds, and bond index funds. See http://flagship2.vanguard.com/VGApp/hnw/FundsByFundType?View=IndexFunds

So, for many asset allocation plans, one can use just index funds, and still not be 100% in equities.

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Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39488 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/26/2004 11:52 PM
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I'm posting rather late on this one it seems but I would highly recommend you review the "parents burned" threads...

Funny how you don't see many people complaining about getting ripped off at Vanguard...

Nick


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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39490 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/27/2004 1:49 AM
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<< Look, I'm not bashing financial advisors and the like (particularly since I spent many years in one of the more bashable professions), but financial advisors are a waste of money and time. >>

While I understand this as an opinion and as far as I'm concerned anyone is welcome to such an opinion . . . .I might only agree if it were stated something more like “most or a great majority of financial advisors are a waste of money and time” or “or all the financial advisors I know of are a waste of money and time” . . .etc. etc. In my own experience, I know that statement is not true all the time.

<< Anyone with sufficient intelligence to read simple magazines can do as well or better than they otherwise would have done with so-called professional advice. >>

I agree that they “can” or might do as well or better. While the past historical numbers can support such a hypothesis, the empirical evidence shows that people on the whole tend to do better WITH advisors. This doesn't mean they're getting the maximum returns that you might expect. It simply means they tend not to do as well on their own for one reason or another; often having to do with how their emotions play into their financial habits and fears. The more education about these things the better people can do as places on the Internet like the Motley Fool and people like you can be a good resource.

<< Folks who aren't able to read usually don't have enough money to interest finacial advisors in the first place. >>

Aside from not trying to equate intelligence with an ability to read, I would agree with the point here. If a financial advisor or advisor is going to provide for his or her family, it's good business to be careful where their valuable time is spent.

<< Folks who are too old to know any better make the best custormers, of course, since they are suckers waiting to be sucked dry of funds. >>

If I were a Senior (well, some people might view me as a Senior . . . a young one <grin>), I might be insulted by this. I know quite of few who are quite old and still remain very intelligent and very sharp on these kinds of matters. What I think you're referring to is the difference in current knowledge between the younger generations and the older ones. The younger generations as a group tend to have more knowledge and are better informed than the oldest generations alive.

And as far as I'm concerned, whether the customer is “too old” or not, the one's that make the “best customers” are those who are well informed, can think clearly and logically and remain sharp. My worst customers tend to be those who aren't that way and tend to take up a LOT of my time every time we get together to review the same things over and over.

<< This is why the adult children of the elderly should take a more active role in helping their aging parents invest wisely. >>

Hmmm??? I see. . . .the adult children acting as financial advisors would be better advisors than letting the aging parents do it themselves??? I'm having a difficult time understanding just where one would draw the line there. I would think it would just depend. And doesn't that go against the position of using advisors at all . . .or is it just about advisors who are paid for their work (assuming they do any work at all <grin>)?


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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39492 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/27/2004 2:15 AM
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<< Are you equating index funds to stock index funds? >>

Actually, for the most part I had the S&P Index 500 in mind since this is what is most often referred to by the author and around here as "index funds" along with the way the question was put.

<< Vanguard offers a variety of index funds, not just US stock index funds, but also a REIT index fund, various international index funds, balanced index funds, targeted retirement index funds, and bond index funds. See http://flagship2.vanguard.com/VGApp/hnw/FundsByFundType?View=IndexFunds >>

Yes, I'm well aware of other indexes. I just didn't feel any these other indexes we're what was really being referenced in any way, else I would have expected the question to be phrased a little different. Not knowing the original poster's asset allocation, the response question seemed to eliminate things like balanced index fund and bond index funds.

<< So, for many asset allocation plans, one can use just index funds, and still not be 100% in equities. >>

Yes, that would be correct. . . . and I feel, a very good point.


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Author: jesserivera67 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39499 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/27/2004 11:11 AM
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...the empirical evidence shows that people on the whole tend to do better WITH advisors.

Curious on this. Would you say that the empirical evidence you are referring to is more historical than present and results from the fact that most people did not know any better?

It seems like more people are becoming educated on their finances and learning how to manage it for themselves because they're finding it's not that difficult. I'm sure there will always be those who do not want to deal with it and refer to a financial advisor.

What's unfortunate is places such as Amex whose financial advisor piece of the business is growing (Amex finance advisors generated $6.2 billion last year, $121 million of which was solely for financial plans and advise according to WSJ). The financial advisors are trained to maintain what is known as their respective TWP ratio (pronounced "TWIP") or Total Weighted Production which is a ratio of total Amex products sold vs. overall products. One that doesn't have a high TWP is reprimanded or let go. (From Class Action lawsuit filed by Attorney Jon Drucker)

Despite who might do better is the question, "Do people go to financial advisor because they think they can do better?" or "Do people go to financial advisors because they don't know any better?"

Some obvisously go because they don't want to deal with their finances and perhaps just don't have the time. Certainly nothing wrong with that as long as they know and understand the fees associated with the service.

Jesse




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Author: telegraph Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39501 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/27/2004 11:25 AM
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a good financial planner is worth having for ***MOST*** folks who have no idea of asset allocation and diversification....and who have no financial markets savvy...

Unfortunately, most of the folks encounter someone who is really a salesman, who offers 'free financial planning' as an inducement to then buy high commission, high fee products.

While some might argue that ****MOST**** people need to have someone to tell them how to invest since those folks don't know enough to do it on their own, and one could make a case for that, others might suggest that most folks should take the time and interest to shop around, compare, and then make their OWN buy decisions.

Yes, for some, being 'forced' to save is something they need to do. HOwever, they should get their financial savvy from 'unbiased' sources, and just about anyone they encounter is very biased.....

But that is like having a salesmen decide 'how much car you should buy' based upon your income and 'needs'. You know the answer!...all the finance company will be willing to finance...the most option loaded highest price vehicle, with 'undercoating and paint sealant and fabric protectant and extended warranty' all sold at or near 'list price'......

We have a local pitchman on the radio...comes on twice a day with 'market reports'...in exchange, the radio station let's him pitch his 'financial seminars' where he offers you a 'free dinner' if you have "IRA or 401K" money to rollover....... you know without a second glance he is willing to give you 'free' financial planning advice, and suggest strongly you invest in his high commision high fee products, including variable annuity/life insurance/mutual funds......

About the time I retired, I went to several seminars that were similar, by competiting organizations...the Merrill Lynch guy spent an hour going over my portfolio and making 'recommendations'...into moderate fee investments, but with a yearly 1% 'fee' on the account, plus stock purchase commissions and purchase loads getting into the funds.....

The DEan Witter guy did an 'analysis', with similar offering...but higher cost/worst performing funds.....

I elected to follow neither....and I"m glad I didn't because I"m 50% ahead of where I would have been by following their advice and paying their fees in just 5 years.

Then my friend talked me into taking the Prudential course to become a 'financial planner'.....the first 'course' you take is 'life insurance' to pass the Texas state test to sell life insurance (fairly rigorous test!).....which I passed.....they had five or six tests and courses to prepare you to sell increasing levels of products.....after I passed the test, I really decided I didn't want to 'foist' their products on my friends and associates. The only money these financial planners made was on commissions..... so naturally they had to pitch and pitch, and try and sell lots of insurance (lots of commissions) and variable annuities and funds......

By the way, my friend ran out of 'contacts' after 2 years of doing that, and went back to 'retirement'.......

t.

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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39506 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/27/2004 2:27 PM
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Jesse (a.k.a. jesserivera67), you asked:

<< Curious on this. Would you say that the empirical evidence you are referring to is more historical than present and results from the fact that most people did not know any better? >>

No, from what I've gathered it's nothing to do with not knowing any better. It's about being able to minimize or take one's emotions out of the decisions for the buying, selling and holding of investments. So, you might see that the issue of such emotions has little to do with historical returns of any certain kind of investment. But the issue of emotions can have a lot to do with any individual's ability to maximize returns within any particular asset allocation.

Studies have been done over and over and in my own experiences and observations over many years has shown that people in general tend to let their emotions dictate their actions to a great degree . . . . no matter how smart and/or knowledgeable they are. And if anyone knows anything about the stock market, it's known that it's driven by emotions making it quite unpredictable. It's about a way to stick to a solid investment plan and minimize the emotional issue attached to the buying, selling and holding of one's investments.

<< It seems like more people are becoming educated on their finances and learning how to manage it for themselves because they're finding it's not that difficult. I'm sure there will always be those who do not want to deal with it and refer to a financial advisor. >>

As you suggest, the knowledge for managing finances and investments is not that difficult . . . particularly for anyone of average or better intelligence. But it's the emotions that most often get in the way of making sound decisions and then mix in a little greed and you've got a recipe for financial disappointment.

<< Despite who might do better is the question, "Do people go to financial advisor because they think they can do better?" or "Do people go to financial advisors because they don't know any better?" >>

In a great many cases, people go to financial advisors for both reasons. And I also feel that a great many people go to financial/investment advisors for the wrong reasons. For example, a wrong reason would be that the advisor could pick a better investment or along that line, pick an investment that will outperform other investments. On the other hand, a right reason would be using an advisor to help keep you stay on track towards your goals, making any prudent adjustments that may be needed as the market changes and/or life experiences change things.

A professional advisor deals with many issues in a much broader range on a daily basis, that individuals of another persuasion do. This “experience” with many different people with many different issues give an advisor incites that many people with less experience might not have. And so I would argue that such experience brings a lot of value to the table, which can help people consider issues that they may have never thought of resulting in better results.

And this very point is what also makes message boards such as these a wonderful tool for individuals as they get more exposure to various people and their philosophies and experiences. Such experiences can help use knowledge more effectively in obtaining those sought after “better results” (not necessarily, maximum results).

<< Some obvisously go because they don't want to deal with their finances and perhaps just don't have the time. Certainly nothing wrong with that as long as they know and understand the fees associated with the service. >>

Those people who go to financial advisors for these reasons are often the one's that are going to get burned as it's often used as a lazy way to deal with one's finances. If they don't have the interest or time for this, they tend not to take the time or interest in choosing a good advisor either. It's not that these reasons are not legitimate reasons for using an advisor; I just find that most people don't put enough effort into choosing advisors and then wonder why they find themselves in a situation where they feel they've been ripped off.


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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39507 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/27/2004 2:38 PM
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t . . .

<< a good financial planner is worth having for ***MOST*** folks who have no idea of asset allocation and diversification....and who have no financial markets savvy...

Unfortunately, most of the folks encounter someone who is really a salesman, who offers 'free financial planning' as an inducement to then buy high commission, high fee products.

While some might argue that ****MOST**** people need to have someone to tell them how to invest since those folks don't know enough to do it on their own, and one could make a case for that, others might suggest that most folks should take the time and interest to shop around, compare, and then make their OWN buy decisions.
>>

Ah ha . . . . now you've got it! <VBG> ;-)

<< Yes, for some, being 'forced' to save is something they need to do. HOwever, they should get their financial savvy from 'unbiased' sources, and just about anyone >> they encounter is very biased..... >>

. . . let's not over do it now. <g> Everyone has a bias (one of the stated absolutes that is true). The trick is finding out just what it is and adjusting or making allowances for it.


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Author: Mark0Young Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39508 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 2/27/2004 2:47 PM
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...the empirical evidence shows that people on the whole tend to do better WITH advisors.

Curious on this. Would you say that the empirical evidence you are referring to is more historical than present and results from the fact that most people did not know any better?

I have also read that people with advisors tend to do better than people without advisors.

Remember, we here on fool.com and other investment boards are a "self-selecting sample" of those who know more about investing than the population at large or at least have the interest so we soon will be.

In spite of the loads (sales charges, deferred sales charges, 12b-1 fees, fees for assets under management), I have read that the typical investor will do better with an advisor than without because:

1. The advisor will typically suggest diversification, not just between stocks, but also between asset types (stocks, bonds), typically using mutual funds (with loads). A typical uninformed investor would take on too much or too little risk, whereas an advisor would try to balance risk and reward with a plan the investor is likely able to stick with.

2. The advisor will typically recommend a systematic investment plan. Contrast that to the tendency for the American public to spend what they have instead of saving or investing for the future.

3. People with advisors are less likely to chase performance (investing in whatever is close to finishing its runup) or invest based on emotions (buying more when they are excited, which is typically near top prices, and selling when they are discouraged, which is typically near the bottom).

Remember, we are referring to the "average investor", not someone who has studied and formulated a sound investment strategy, not someone who is a regular reader of fool.com, morningstar.com, or the like.

Also, like any heterogeneous population, some advisors are better than others.

An individual who has the appropriate knowledge and self-control and a suitable investment strategy would probably do better alone with the appropriate investments than with an advisor.

But the studies are based on broad samplings that include people with no clue about investing or who allow their feelings to drive their investments, not the self-selecting samples like members of fool.com or morningstar.com.

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Author: mberan One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39575 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 3/1/2004 8:47 PM
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Look, I don't know if you have an ax to grind against AmEx. I did very very well, in the 90's as well as into 2004 with my guy. I communicate with him regularly, and he matches my style of investing (aggressive) with what he thinks fits. It's never a one only, but a list of alternatives. He does homework, I do mine based on his homework, then I
make the decision. He's made various other suggestions (eg gifting stock to my son for college payments)as well.
I don't have the time to research all of the alternatives. That's why I pay for someone to do it. The way I look at it is similar to my car. I have a "classic". I could do some of the work, but I pay someone to do it, after I do some diagnosis of what might be a problem, or a way to improve the car. That way I can drive it, with the top down the radio blasting, and enjoy it.
Mike

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Author: batdoe Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39711 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 3/5/2004 9:36 PM
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It sounds to me that your AmEx guy could invest the pants off my AmEx guy. If you like him, keep him.

Lisa

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Author: duke345432 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39869 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 3/17/2004 10:21 PM
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I think of someone like Malcolm Forbs. The facts are, he owned millions of whole life insurance and was in the process of buying some more at the time of his death.......
------
I don't know his situation, but if I had millions in assets and no debt, I can't think of a reason I would need life insurance. Perhaps you can elaborate. I don't feel the need to make my child rich as a result of my death.

On the other side of the same coin, maybe there could have been 30% less in that nest egg too. . . ???

>>>>>>>>>>>>>\

It is obvious that Senior Forbes did not own many millions worth of policies. It was set up so the estate owned the policy and was used to pay the taxes that all the Republicans want to eliminate.

Forbes the younger sold back the eggs and other trivia to the Russians for a hundred million, mostly stepped up basis so not much tax there either. Auction house got their ten percent though.

I bought term when newly married and when it expired 15 years later I had far more capital than the policy value. Part of the reason was that term cost so small amount that the remaining was invested, profitably. One stock bought early on is now worth about 140 times purchase price. The broker gave me advice that was worth more than the present value of the stock. Buy for long term. That was forty-five years ago, and it is still perfect investment advice.

The AMEX story has too many ramifications beside the inept advice. One bit of advice I did get in a presentation by an advisor at a "come hear free lecture": have a significant umbrella liability policy. I did and still carry it. I recently doubled size of policy. The second half cost about 2/3 the first part, which suggests that there is still real risk.

duke

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Author: duke345432 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39870 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 3/17/2004 10:43 PM
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<< It's really simple to test...

If you had put that money into index funds with Vanguard, would you be ahead or behind of where you are today? >>

But not everybody has the risk tolerance to put all there money at such risk. So they may have a very different asset allocation. We don't know what this person's risk tolerance is nor just how they invested. For all we know they DID use an index fund to some extent. Right?

>>>>>>>>>>>>

Actually the index fund is perhaps the least risky single investment that one could make. If 5 of the 500 in the SP 500 go belly up the total hit might be 5%, assuming World Com and other such crooks were in the index, no I'm not going to research this one. If the smaller members it woudl be in the noise level.

Only Berkshire Hathaway has beat that index for a lifetime. With more funds than stocks there will be a few 5 sigma performances some positive and some negative that look good/bad for a few years or even a decade, but for a very long time who knows.


I think I might test my current assets vs. Vanguard for my investment lifetime.



duke

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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39876 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 3/18/2004 12:31 PM
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duke345432 , you wrote:

<< It is obvious that Senior Forbes did not own many millions worth of policies. It was set up so the estate owned the policy and was used to pay the taxes that all the Republicans want to eliminate >>

k, ok, ok . . . . he didn't “own” them. The point was he bought them and was buying more as they still had a viable use.

<< Forbes the younger sold back the eggs and other trivia to the Russians for a hundred million, mostly stepped up basis so not much tax there either. Auction house got their ten percent though. >>

. . . . .???

<< I bought term when newly married and when it expired 15 years later I had far more capital than the policy value. Part of the reason was that term cost so small amount that the remaining was invested, profitably. One stock bought early on is now worth about 140 times purchase price. The broker gave me advice that was worth more than the present value of the stock. Buy for long term. That was forty-five years ago, and it is still perfect investment advice. >>

Congratulations.

I guess you would have even made more if you hadn't bought the term insurance since it never had to pay off.

<< The AMEX story has too many ramifications beside the inept advice. One bit of advice I did get in a presentation by an advisor at a "come hear free lecture": have a significant umbrella liability policy. I did and still carry it. I recently doubled size of policy. The second half cost about 2/3 the first part, which suggests that there is still real risk. >>

Smart move.


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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39877 of 76418
Subject: Re: My Meeting with the AmEx guy Date: 3/18/2004 12:44 PM
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duke345432 , you responeded:

<< But not everybody has the risk tolerance to put all there money at such risk. So they may have a very different asset allocation. We don't know what this person's risk tolerance is nor just how they invested. For all we know they DID use an index fund to some extent. Right?

>>>>>>>>>>>>

Actually the index fund is perhaps the least risky single investment that one could make. If 5 of the 500 in the SP 500 go belly up the total hit might be 5%, assuming World Com and other such crooks were in the index, no I'm not going to research this one. If the smaller members it woudl be in the noise level.
>>

I was talking about an individual's risk tolerance, not the risk in the market. An individual's risk tolerance has to do with more than just any market risk that might exist. . . . a big part of which has to do with the emotional side of dealing with market swings.


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