The Employee Benefit Retirement Institute came out with its latest U.S. consumer retirement confidence survey results and found something expected: The typical American has about $5 in free cash, and actually owes that $5 to a dear child’s grade school read-a-thon.
The U.S. Department of Labor and many noble consumer advocacy and financial planning want to get rid of commission-based retirement products sales programs because they hate the idea that greedy sales reps may sell consumers high-fee products — such as life insurance, disability insurance, long-term care insurance or supplemental health insurance — that aren’t all that great just to win a free trip to Orlando.
The idea is that all of the ordinary broke American workers will pay $1,000 to fee-based financial advisors, or go on a website created by fee-based planners, and buy wonderful, low-fee products free from the taint of sales rep bias.
On the one hand: Certainly, there are commission-based sales reps out there who sell terrible products to the wrong people and should be stopped.
On the other hand: An awful lot of what goes into high-class retirement planning is a matter of people using advanced degrees, professional designations, well-tailored clothing, white teeth and fee-based compensation arrangements as a buffer from the reality that the future is… the future.
Planners or advisors may know a lot of important things about tax laws, insurance products, diversification, and not putting all of your life savings in one new restaurant that serves broiled locusts. But they don’t necessarily have any firmer grasp on what exactly to do about the future than anyone else.
One of the most important lessons an advisor can probably safely teach us is, all other things being equal, it’s much better to have more than $1,000 in a checking account and some insurance that protects against reasonably common disasters than not to have those things.
If a high-pressured sales rep somehow exists in this web-loving world long enough to sell us any legitimate personal protection insurance or retirement savings or investment product that’s somewhere in the ballpark of what we need: What a saint.
Maybe the product is somewhat more expensive than it could be. Maybe the price will go up. Maybe we’d be better off just going online and shopping.
But, how many of the people with huge, obvious personal protection and retirement savings gaps do any such thing? We’re more likely to go online to shop for nightgowns and shoes than for protecting ourselves against devastation.
Even if the government set up better safety net programs, any programs that a pre-Star Trek-economy nation can afford will have holes in them. They might keep you off the street, but they won’t pay your golf club dues, even if you think of golfing as an essential.
Maybe the government will, finally, succeed at protecting us from greedy people who will pester us and twist our arms till we, say, give our families some protection against the risk of us dropping dead, or spending three months in a nursing home. But I’m not sure that’s as much of a wonderful thing as the people expecting us to eagerly buy what we need through unbiased websites (and fee-based advisors) tell us it is.
Maybe what we really need is more high-pressured sales reps to cold call us and harangue us from tables at big box stores, tillwe buy flawed but legitimate, fully reserved products that aren’t necessarily the best possible products, but are better than just having a vague sense that we ought to get around to visiting a fabulous, unbiased, comprehensive financial advice website someday.
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