bank

BUYING INVESTMENTS, INSURANCE AND ANNUITIES AT A BANK

There never has been, nor is there currently, any reason for ever buying an investment or insurance at a bank. True, you may like the institution, the savings rate is good, the money is green, whatever. You trust them with your money.

WRONG!

You trust FDIC.

(Further, never confuse trust with competency.)

Certainly the employees and tellers are all very nice, including the securities representative that may have called on you directly or who you saw at a desk at the bank.

SO WHAT!!

Liking (and the subsequent use for advice on investing/insurance/financial planning) of an individual because of their looks, religion, golf game, nice legs, office decor, political affiliation or whatever is a poor excuse for buying an investment (though done by at least 75% of investors). Secondly, most reps at a bank do not possess more than a Series 6 securities license and an insurance license. I am not impressed. (Even a Series 7 is nothing to brag about- and I've taught all the licenses.) More importantly, they, almost universally, do not have and cannot use an HP12C- or any financial calculator. Well, that pretty much ends the discussion right there because the person is effectively unqualified to talk about money- bank or no bank. Lastly, did you get their material as a Registered Investment Advisor or similar- bank or no bank? You must be sure you get one and review it carefully for the designations and knowledge necessary to assist you- as addressed in Who Can You Trust. Reading this will make you a more knowledgeable investor- or at least guide you to someone who might be knowledgeable.

Now, I am not guaranteeing the effectiveness of an investment /insurance or any other area of your life simply because you use an adviser that is more knowledgeable than someone else. Nor can I guarantee that they are universally more ethical and moral (I know many who are not- including even Directors and Presidents of the National Planning Organizations). But it makes no sense to me to use people who only have minimal skills when you have, in almost all areas, individuals with far greater competency. True, you may have to drive further to talk and deal with them. Unfortunately, many people don't like that inconvenience. Fine. If money is not important to you, go ahead and find some schmuck that is local- but never again complain about financial incompetency and/or losing money.

Lastly, most bank annuities pay less/have more fees. Insurance coverage will almost undoubtedly cost more and/or you will end up buying the wrong type. And the mutual funds are universally loaded- at least back end loaded and with 12b-1 fees. Admittedly, that does not make a fund bad, but if it was sold by someone without a true investment background, you invariably are buying the wrong thing at the wrong time and at the wrong risk level.

There, that didn't take long at all, did it.

(Yeah, I know I came on strong. If you have already bought something at a bank (or similar institution with unknowledgeable agents- read Who Can You Trust), just completely go through the exercise as though it was your first time and adjust your adviser and investments as necessary. If your mother/grandfather, etc. is considering doing investments or insurance at a bank, go over this and my other pages thoroughly with them so they don't make a big mistake.

For those that think this commentary too harsh, I submit that literally every bank- and other investment organization for that matter- is providing fraudulent brochures with totally fabricated numbers for the sale of variable annuities. You can read further articles at this site for verification. It is within that context that I think consumers are being victimized by the very institutions that they want to trust. As far as the brochures being "accepted or approved" by the SEC or NASD, I submit that they are all reviewed by attorneys who couldn't use a financial calculator to save their souls and have next to nil understanding of returns or use of investments. The numbers allowed are either a complete distortion of facts and/or have no basis in reality.

Here is an independent reason for not buying investments from an individual lacking in the fundamental:

Anytime a salesman or broker attempts to sell you a security of any type, ask him or her what its standard deviation of annual returns is (or is expected to be if it is a new offering). If he or she doesn’t know, don’t even think about buying it. If your broker is not familiar with the concept of the standard deviation of returns, get a new one.

William Bernstein

Standard deviation is NOT taught as part of any securities or insurance licensing course in America.

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