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By Dr. Rikki Racela, WCI Columnist
“I hope you are joking?” my wife yelled at me with derision and anger seething in her voice.
“How much did you lose? I trusted you. I trusted your friend (referring to my high school buddy and financial “advisor”)! Go back to him and get our money back. My enraged better half then marched upstairs, each step hitting the wooden floor with such phenomenal force that I thought it was going to break.
I had just told him that we had lost $50,000 in whole life insurance. If there was ever a time when I felt like I should have lied to my wife, it was then, then. (As an aside, please, never lie to your wife, finances or otherwise).
As I sat on the couch, wiping the tears from my eyes after realizing how much I had hurt my wife by trusting my high school buddy turned Northwestern-Mutual financial advisor, I needed pause. If you’ve read my previous blog post, you know I’m a Star Wars addict. Turning the TV on to Disney+, the most recent movie that appeared on my flat screen was Revenge of the Sith. As I looked at the photo of Hayden Christensen looking at me with the red-yellow eyes of a newly created Darth Vader, I realized at that moment how much this painful financial tragedy was linked to the galactic tragedy of the saga Star Wars:
My financial advisor was Anakin Skywalker.
“Anakin was a good friend”
So says Obi-Wan Kenobi, the man who will eventually be struck down by this former “good friend’s” lightsaber. Just like my high school buddy would put me down with a whole life insurance policy. We didn’t fight to secure peace for an entire galaxy or anything, but we did play football together in high school and made the Central Jersey Group 4 state championship as a sophomore. Just as Obi-Wan gained ever-increasing trust in Anakin through the trials and tribulations of holding the Republic together and forging interplanetary peace, so did I put more and more trust in my future “counsellor.” as we worked hard to become proficient football players and propel our team to this New Jersey State Championship.
Outside of football, we grew up playing Little League, spent time together and learned in the same school system in town. It is emotionally impossible not to grant financial loyalty to a childhood friend when he becomes a financial “advisor”.
More information here:
Should I use a financial advisor or do it myself?
“If you act on the assumption that every broker, insurance salesman and financial adviser you meet is a hardened criminal, you will be doing just fine”
So says Bill Bernstein, the renowned financial mentor and educator and, given that we’re both neurologists, a man after my heart. However, even if I had known this advice in the past, I would still have trusted my boyfriend with my money. Sorry Bill, I can’t see my friend as a hardened criminal. Obi-Wan also couldn’t see Anakin as a Sith Lord. It’s because I grew up with my buddy and he gained my trust, and I know his character intimately. He never even got detention (although he approached when our chemistry teacher caught him cracking jokes during class).
As for Obi-Wan, he never saw Anakin do anything wrong throughout episodes 1 and 2. My ex-financial “advisor” doesn’t have the soul of a criminal. He has the heart of someone who, well, is my buddy. And Northwestern Mutual knew it well, as did Palpatine sensing Anakin’s power. Insurance companies have a knack for hiring good people. They use a psychological technique that can counter Bill Bernstein’s advice called affinity bias.
Michael Pompian, in a 2016 Morningstar article, defines affinity bias as “an individual’s tendency to make irrational and uneconomic consumption or investment decisions based on how they think ‘a certain product or service will reflect its values’. Northwestern Mutual had used human behavior against me. When insurance companies teach “advisers,” they ask them to contact friends and family to sell inappropriate products and high-cost funds.
My affinity bias allowed my boyfriend to ruin my financial life without me fighting back. I thought his shared values of trust, hard work, and integrity to do what’s best for people would carry over to the investments and “advice” offered by Northwestern Mutual. It’s similar to how Obi-Wan thought Anakin, being a longtime fellow Jedi, could be trusted to resist the tantalizing fruit of the dark side of the Force. At least my affinity bias didn’t end up enslaving an entire galaxy! And the last time I checked, it doesn’t look like my ex-counsellor and I are going to fight a duel in the future, which will result in my death.
More information here:
Northwestern Mutual ‘Financial Advisor’ Review and Confessions
It didn’t end my life, but whole life insurance really screwed me up
I’ve lost thousands of dollars being tricked. I didn’t get shot like Obi-Wan did, but that was really how it was. After seven years, I had $31,000 in credit card debt and was forcing myself to see more patients to meet the $28,000 in whole life insurance premiums. After all that, my cash value in the policies for my wife and I was $120,000. But we had poured $170,000 into these destructive policies. That’s a loss after seven years of $50,000!!! Some investments.
The dark side is powerful, indeed. But wait, there’s more. Much like Anakin, when he converted to the dark side, helped kill Mace Windu, slaughtered young Jedi, hunted down rebels, tortured Han Solo, and mutilated his son’s hand, my adviser did the following :
- I had been placed in a variable annuity within an IRA (stupid to pay for a tax-deferred product that’s already in a tax-deferred account!).
- I had a bogus occupational disability insurance policy that Northwestern Mutual called “definition of the medical profession.”
- I had a convertible life insurance policy to age 80 (a very inappropriate, unnecessarily long and expensive term life insurance policy).
- I had 529 plans for my kids at a cost of 150 basis points while the self-directed plan is only 10 basis points.
Just as it’s nearly impossible to sum up the damage Darth Vader has inflicted on the galaxy, it was also daunting for me to fully assess the financial damage my buddy has done to my family’s financial lives. This money was a representation of our hard work, long nights on calls, and sacrificed time with the children, and the financial heartbreak caused by Northwestern Mutual extended to my marriage. Even now it stings.
More information here:
From FinStupid to FinSmart
“Cut me down and I will become more powerful than you can imagine”
Obi-Wan couldn’t have said it better for my situation. After being murdered by Dark, Obi-Wan had the ability to transcend space and communicate with Luke Skywalker, helping him find Yoda, aiding him in his Jedi training, and ultimately allowing Luke to take down Dark and to save the galaxy. After letting my boyfriend enjoy and draining me of my hard earned wealth, I learned from that experience to gain financial knowledge and went wild consuming everything The White Coat Investor had to offer.
As of January 2019 I have read Dr. Jim Dahle’s book A Doctor’s Guide To Personal Finance, completed the Fire Your Financial Advisor course, read most sections of WCI recommended books, I read all of the WCI podcasts and created a written financial plan that will help my family achieve our financial goals. And, as you can see, I am now financially qualified to write this blog post you are reading.
It’s not like I saved the galaxy or anything, but it sure feels good!
“Are you still friends? »
I get this question all the time after telling my story. Yes, we are still friends. I tell people that I don’t hate the gamer, I hate the game. Just as the dark side of the Force is to blame for Anakin becoming Darth Vader, it’s the influence of Northwestern Mutual that learned to my endearing friend to sell inappropriate financial products under the guise of being optimal “investments”.
Donovan Sanchez, in a previous blog post, mentions that he and other Northwestern Mutual advisors sold products because “people will do what it takes to feed their families and provide a good life for themselves- themselves and to those they love”. Anakin Skywalker himself had nightmarish future glimpses of his wife’s death, which Palpatine used as a solid bridge for Anakin to turn to the dark side in hopes of preventing her death.
Just like Luke Skywalker said of his dad, “There’s still good in him,” my buddy still works for Northwestern Mutual. But I hope one day he’ll be like Darth Vader in Return of the Jedi and turn to the good side, just like Donovan did. In the meantime, there are other financial salespeople like my buddy, and while I respect Bill Bernstein’s financial prowess more than my own, I think changing his quote would serve better to protect the uninitiated in finance from making my mistake :
“If you assume that every broker, insurance salesperson, and financial advisor you meet is Anakin Skywalker, you’ll be fine.”
If I had done that, my family and I would have been fine too.
What do you think? Would mentoring potential “advisors” like a future Darth Vader have saved you from being taken advantage of? Would he break through the facade of affinity bias to help reveal the true intentions of the financial firm they work for? Comments below!