What are your thoughts on the financial services industry?

Question

With the BiggerPockets member base being so diverse (not just in Real Estate), I would love to hear peoples' thoughts about the financial services industry. As a reference, the industry consists of Banking, Insurance, Money Managers, Financial Advisors, Real Estate Agents, Accountants, etc.

Mike Dymski · Answer

For us, agents and lenders are critical partners...REI CPA is very helpful...plus term life insurance and index funds/ETFs to round it out.

Steve Vaughan · Answer

Recommendations and offerings seem really limited.  I was guilty of same as a former Series 7 broker.  They only offer what they offer. Same goes for agents.  Not enough creativity.

For instance, my cousin just inherited some momey and saw a long-term planner of some kind.  Nothing was mentioned about hiring their kids to help with his wife's home business, allowing the kids to earn income (and them deductions up to $12500) so they could fund Roths. Roths and their awesome flexibility weren't mentioned at all and they should be #2 behind a matching retirement plan.  Just 1 example.  Hopefully my cousin heard me when I suggested it to him.

I assume you are in the industry,  Mack? Oh, I see now you're an FA.  Be a creative one!

Mack Bekeza · Answer

@Steve Vaughan, I couldn't agree more! That's why I am with an independent RIA. Many Wirehouse and Insurance companies don't offer nearly enough options and ways to be creative when making financial plans, especially for Real Estate investors!

Thank you for sharing your thoughts.

Zachary Paschke · Answer

I think inside the industry we’re having some of the concerns people outside the industry are. Financial professionals can be hard to vet. I am a specialist and people think I offer the same kind of service as a typical call center rep. There is this very fast food version of financial advice popping up. In an effort to “save money” people are getting questionable advice. Many of my clients come to me because they’ve been told by local agents or call center reps that they can’t get the coverage they want. It can be hard for investors to get life insurance (especially large amounts of term) if they don’t have W2 jobs or assets (10 mortgages isn’t an asset 😉). Many companies view investment income as uninsurable as it continues to earn even as the insured passes. It’s not impossible, just can be a little more difficult. I’ve had clients that were unable to get what they needed from a large call center that got the coverage they needed with me (sometimes the solutions are a little more creative than they expected).

With that said, people are terrified of being sold. I get it. I would love to be able to charge someone for the advice of putting a policy together for them. I do a lot of high-risk work, meaning I write policies for people with more complex health problems. I’d love to charge a consultation fee. Unfortunately, people have been conditioned into believing that financial advice should be “free” (the advisor collects a commission to sell products).

Although there are some fee-based planners, that has little influence on the larger industry runs. Obviously, the only industry you listed that runs completely fee-based is accounts.

The biggest struggle on my side is that because of the fear of being sold, people often fight the advising process.

The funniest example was the time I got a call from a Primerica agent (for those that don’t know Primerica is like the Pampered Chef of life insurance and they only sell term products- they are single handedly the biggest source of failed insurance exams across the county). She called me, because she wanted to verify that Primerica was the only company that offers guaranteed renewals after the level term period ends (if you take out a 20 year policy, will they renew for a higher price at the end of the 20 years). Well, almost every company offers that - and in writing. She didn’t want to hear that. I recommended if that was a large concern that she get a Guaranteed Universal Life policy and lock her low rate in now and keep it. She was young it would have been cheap.  She got so angry at that she started screaming at me over the phone, “I told you I don’t want a whole life policy. Not whole life or universal life. I listen to Dave Ramsey you’re not taking advantage of me.” I tried explaining that the policy I was recommending was basically like a long-term term insurance product where the price doesn’t go up, but there’s no real cash value being built up (Dave Ramsey’s point of contention with whole life). Either way, she her self was an “agent.” She couldn’t speak the industry lingo and didn’t understand any policy structure outside a 10,15,20,30 year term policy. And she lost it. She screamed at me for a sold 5 minutes straight.

That to be said, from the outside there’s little to know about the success of the person you’re working with. It makes it hard to vet a good advisor from a poor one and when you’re looking for “free” advice it is often worth what you paid. There’s so much really good advice and so much shady advice on the inter webs (including here).

Bjorn Ahlblad · Answer

@Mack Bekeza As many crooks in banking as there are in RE! 🧐

Ellis San Jose · Answer

Full-time real estate & note investor here.  Former Financial Advisor Series 7, CFP etc.

Having trusted advisors are important CPA, Banker, Insurance etc. I have found it rare to have a money manager or Financial Advisor equipped to consult with Professional Real Estate Investors. Built in conflict of interest.

Mack Bekeza · Answer

@Zachary Paschke, First off, thank you for sharing your thoughts in such depth.

There are too many people that have the wrong idea about Advisors and Insurance Reps. I am always concerned about the actual quality of Financial Advice given by call centers too. Although their intention is to bring convenience in our industry, it doesn't always mean that it is truly tailored to meet the client's actual needs. I believe independent advisors should act much more like teachers rather than customer service reps or salesmen. On top of that, our education system seldom offers personal finance courses to young students, which will enable people to take advice from gurus or the internet and question whether or not it makes sense for them in their particular situation. The ability to be resourceful and knowledgeable with money is invaluable and should be taught at a very young age.

Finally, I highly appreciate that you specialize in difficult life insurance cases. I like people who like doing things most people are unwilling to do, especially if it makes a positive impact on people's lives. Hopefully, as time passes, there will be easier ways to vet an advisor.

Mack Bekeza · Answer

@Bjorn Ahlblad, thank you for sharing!

Mack Bekeza · Answer

@Ellis San Jose, thank you for sharing!

What are your thoughts on the financial services industry?

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