Tuesday, May 6, 2008

fee"dumb" 55

FEE-DUMB 55


WHEN IT COMES TO FINANCIAL PRODUCTS, TRUTH IN ADVERTISING IS A SPEED BUMP THAT RARELY SLOWS THE MARKETING MACHINE!

LET’S LOOK ATA FEW OF THE GREATEST MARKETING PROGRAMS IN FINANCIAL HISTORY! IN A PREVIOUS RANT WE DISSED THE CURRENT MARKETING SLOGANS OF THE BIG BANKS BUT WE DID NOT LOOK BACK AT SOME OF THE BIGGEST WINNERS IN CANADIAN HISTORY!

“FEE-DUMB 55”: AN INNOVATIVE PROGRAM OF MUTUAL FUND AND SEGREGATED FUND SALES DESIGNED TO ENSURE YOUR ADVISOR IS INDEPENDENTLY WEALTHY BY THE TIME THEY ARE 55 YEARS OF AGE!

The real cool part about this marketing program is the fact that it was the type of marketing that would naturally appeal to people nearing retirement; and yet that is the segment that it could do the least to assist. Unless you suddenly win a lottery at age 45, you will be hard pressed to find freedom from financial worry at age 55.

In fact this advertising should have been focused on graduating students who, depending on student loans, might be able to survive the high fee mutual fund market and retire at age 55. In fact a student who graduated at 20 and put $1,000./yr in an RRSP earning 6% would have a not very significant $125,000 to retire on at age 55. That is actually less than $50,000 in today’s dollars. So if you wanted to retire at 55 and visited your high fee sales person at age 40 you better be a mega income earner or have a great pension plan before you arrive.

In fact this campaign may single-handedly disappoint more Canadians than any in history. Retiring at 55 is not possible for most of us and even less possible if you have been paying 2.5% MERs!

Another great financial marketing scheme is being played our as we speak! Manulife is turning investing on its head with Income Plus! We can understand that a lot of blood has rushed to the investors head! How else do you explain an investment that is sold as a “guarantee” that will help you sleep at night; but has so many confusing twists and turns that it can keep you up at night just trying to figure out the odds you can ever reset and make a profit above what you put in!
At the end of the day one of the most common warnings comes to mind: if it is too complicated for investors to understand then the person selling it is making a huge commission. As with most “guaranteed” products, you pay a huge price to avoid an unlikely future loss over the life of the investment.

These two marketing schemes stand out as great examples of marketing to the unlikely dream on the one hand and the unlikely fear on the other! Greed that you can find a quick easy way to retire early and fear that the market will suddenly crash just as you retire! Both fear and greed can cause investors to look past fees and the skeptic might even think the ads count on that!

Let me know what marketing scheme is catching your eye these days!

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