Welcome to the political season, a time of countless local, state and national elections. It is also a time when politicians make promises they will never keep – I promise! As the noted Finnish architect Eliel Saarinen once said, “Promises and pie crusts are made to be broken.” But although no one is surprised when politicians break their promises, it unfortunately results in jaded citizens. And much of the same thing happens in our own business.
For example, insurance policies bind insurers to provide benefits in return for the payment of premiums. Financial guarantee associations and the FDIC promise to make consumers whole if their insurer or bank goes bust.
Although as a whole, our industry is good at keeping its promises, individual advisors sometimes impersonate politicians and make promises they have no business making, such as unrealistic performance results. Recently, Business Week shined a spotlight on these “401(k) predators.” These advisors put on seminars for corporate employees on how to retire early using their existing 401(k) savings. The problem is, to lure clients, they project unrealistic investment returns (14 percent in one case) and promote aggressive withdrawals from 401(k) accounts. This is unethical and unnecessary. Investment asset classes have a range of reasonable and expected results, which most clients readily accept, so it does not make sense to jeopardize your business by projecting results that teeter on the edge of the bell curve.