Transcript:

Announcer:

This is More Knowledge, More Wealth, with your host, Gabriel Shahin. Gabriel is a certified financial planner and a registered investment advisor at Falcon Wealth Planning. This show is not intended to provide personalized investment advice through this broadcast and does not represent that the services or securities discussed, are suitable for any investor. Investors are advised not to rely on any information contained in the broadcast, in the process of making a full informed investment decision. More Knowledge, More Wealth, on AM 590 The Answer. Now here's your host, Gabriel Shahin.

Gabriel Shahin:

In good afternoon. This is Gabriel Shahin, certified financial planner and your host of More Knowledge, More Wealth, here on every weekend, talking about all important topics of personal finance. Our goal is to go over the knowledge you need to increase your wealth. Hop on every weekend, talking about all important topics of personal finance. If you want to reach out to myself or anyone of our colleagues here at Falcon Wealth Planning, our phone number is 855-963-2526. That's 855-96-FALCON, like the bird, where we can help relate this show to your specific situation.

Now, I'm a principal of Falcon Wealth Planning. We are a fee only registered investment advisory firm that also specialize in asset management, but our goal is to help you with anything that involves the dollar sign, folks. That's the difficult part of what we do. That's the fun part of what we do. That goes over where you are today, how retirement looks like, talking about investments, estate planning, insurance, folks, you name it, anything that involves a dollar sign, give us a call. We'll be happy to help. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird. Feel free to visit our website at falconwealthplanning.com. That's falconwp.com for short.

So today, we are going to go over a handful of items, especially as there's market volatility. And, folks, there's always market volatility. Volatility just means non-constant, so volatility can be on the way up, let alone on the way down. And what we're seeing, of course, and when people pay attention is when they lose money, which is natural. It's actually not an uncommon event. It's very normal for there to be times where markets are dropping. We're not saying we like it. We're not saying we're happy with it, but it's a normal occurrence in the market. So I bring this up to you really for the biggest reason of being aware of predators, financial predators, that are out there that are trying to sell you junk. And I'll give you two key components. Now, most of this comes from insurance salespeople that say they're some vice-president or president. They're normally on these radio shows or they're on these late night infomercials where they are selling things on TV, and you hear these people posing as specialists. And all they're trying to do is have you to call in and have you being sold some insurance product.

Now, the two biggest insurance products out there that are some of the most misleading is annuities and these indexed universal life insurance policies, where they try to say, "You cannot lose," which is just insane to me. That they are proposing something like that, well, they are not being fully truthful on your money. And they tell you, here's the worst part, this is how you know it's a scam, but, sadly, some of the most persuasive individuals are in this field. Why? Because they get paid a boatload. They get paid a lot of money. And then on top of that, you can't get out of it if you wanted to just because there's surrender fees, which, oh, by the way, the commissions you paid in, which are almost everything that you put into the darn thing. And, sadly, we see that all the time. People come to us after the fact of buying these things, saying, "I wish I never done it." Or, "If I truly understand how it works, I would have never moved forward." That is sad, folks, but this is what happens.

So I'm trying to tell you of what's out there, of how these things works. I mean they are heavily loaded with commissions on the front-end and insurance costs don't change, and they try to sell you that this grows tax free and, oh, by the way, you can't lose money is wrong. It's a lie. It's unethical. The insurance costs never change. They never go down. They never go away. They actually continue to increase as you get older. And then they try to say, "You can take out your money tax-free," which, number one, try it. The interest that its accumulated, you will have to pay taxes if you go to surrender it. And that's after 10 plus years because the first 10 plus years is all gone towards commissions of the person who sold it to you. And then they say, if it's on this growth, "Look at these numbers. Look at this back [inaudible 00:04:11] numbers."

Folks, they are cherry-picking years that only had a monthly increase. What they don't tell you, what they fail to tell you, is they have monthly caps on how much you can make and unlimited caps on what they lose. So what's the problem with that, you ask? Well, because most of the returns come in a one-month period, so how smart of the insurance company to put a cap on it. And most of the losses also come into a one-month period, but they unlimit those. So when you do the math on something like this, you end up making nothing, and it's sad. And we see this all the time. And if you bought into this, if you got sold into one of these and, sadly, a lot of these people are on podcasts, on radios, on social media. I've seen some people, young individuals, that are selling these things, saying, "These compounds so on and so forth because ... Why would you rather have a 10% rate of return into a ROTH IRA or an insurance product?"

What they're failing to tell you is the additional cost that you're paying into it. It's not apples to apples. They're implying that all the money gets invested, which is just a lie. You're paying for insurance. You're paying for mortality and expense charge, administration costs, rider costs. It's just such an unfair comment and how these individuals are allowed to be on these social platforms, radio, TV included, blows my mind. I recommend that you get a second opinion before you ever do anything like that. It's insane to me, and don't feel bad that you're taking these people's time. You're trying to learn it. And they're trying to tell you, they don't pay you or you don't pay them, they get paid by the insurance company is a straight out lie. You're paying them a commission through the product that they sold you.

If you need help with this, give us a call. This is what we can help offer guidance on. And we don't sell this stuff because we're not allowed to make commissions of any kind. We're a fee only advisory firm. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird. We can help put this together for you and answer the questions that you have and really dissect what you're actually being sold. It's ridiculous that this is happening.

By the way, folks, if you're just joining us, you're listening to Gabriel Shahin, certified financial planner and your host of More Knowledge, More Wealth, here on every weekend talking about all important topics of personal finance. And, today, we are discussing these unethical sales practices, people trying to sell you junk. Junk. Insurance products are designed to protect. That's what they're designed to do. You want to make money on life insurance? Great. Go die. I mean, I'm sorry if that sounds bad, but that's the reality. You can only make money if you use it, and that means death. That's it. And it's sad that people don't see that or understand that. And it's not their fault because they're being sold or, look, why would you pay for term insurance? You're losing all that money, not because I'm paying $30 versus $500 a month. I'd rather take that extra $450 a month and invest it. That's what I would rather do because you're not going to get the cash value plus the death benefit. You only get the death benefit if somebody dies. They don't tell you that, do you?

And so the only way you can make money on insurance, insurance, keyword, insurance, is to use it. And how do you use life insurance? How do you use it, guys? Yeah, you have to die. That's the only way to make money and for it to be profitable. I'll give you another example. How do you make home insurance? How do you use that? Where your home has to burn down and, by the way, if you live it in 2,500 square foot house, they're not going to rebuild you at 15,000 square foot house. Why? Because you're not allowed to make money with insurance. It's illegal. It's supposed to bring you a whole. So that's why if your 2,500 square foot house runs down, they will not rebuild you a 15,000-square foot house; they'll rebuild you your 2,500 square foot house.

Let's talk about car. That's another form of insurance. Let's say you rear-end somebody in your car or somebody rear-ends you in your car is totaled, and you're driving a Toyota Prius. Great vehicle, one of my favorite cars that I ever drove. And you spent 30,000 on that Toyota Prius. Now, are they going to replace it with the Lamborghini? No, you've not allowed to make money on insurance. It's designed to make you whole.

Let's talk about health insurance. When you go to the doctor's office, they won't give you a brand new toaster. It's designed to make you whole, make you healthy. Life insurance is no different. Don't fall for these gimmicks. It's ridiculous. It's embarrassing that they're selling this illegally. I mean, it's just such a negative, just feeling and stigma to financial professionals and these people aren't financial professionals. They're insurance salespeople. That's what they are. It's not fair that they get to call themselves whatever they want and the industry doesn't regulate it.

So if you're getting pitched this thing, and by the way, if it sounds too good to be true, it probably is. "Oh, you get this life insurance. It protects you if you die. And then if you don't die, you get all this money at the end." No, it doesn't work that way. Going to something even similar to that is a return of principal product, which you're overpaying on, but it doesn't work like that on indexed universal life or variable universal life or VUL life. It just doesn't. The cost of insurance, your life insurance goes up always. At least with term insurance, yeah, it expires in 30 years. But if you do the right thing and take ... instead of paying 500 a month, you pay $30 a month, you take that extra $470 and invest it over the next 30 years, you make a lot more than what you would have gotten on that universal life insurance policy. It's ridiculous. It's sad. I'm actually doing the math as we speak to see what $470 a month will get you over 30 years just so I can let you guys know and we'll do that at 8% return. Heck, we can do it on 7% return. You would have $575,000. It's ridiculous. All you have to do is do the right things without their help. Help, with the air quotes for those watching it on YouTube.

Folks, this stuff riles me up because it's wrong. It's not fair. Honest people are losing because of this. So you have to make sure you are your best advocate and the best way to do that is seek a second opinion. Wouldn't you get that if somebody, you know, told you, you were sick at the hospitals, going back to health insurance, or somebody told you your car was totaled, or that you only get $10,000 when you know your car you can easily sell it for 20, especially in today with supply and demand? Wouldn't you say the same thing if your house was burning down? When a contractor's like, "I can't rebuild it for $600,000. Maybe three years ago." Well, you have to get a second opinion and seek help.

Folks, that's what we are. We can help. Give us a call. We got offices all across California. We help people nationwide. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird. We can help with a personal questionnaire, confidential assessment for you to help relate this show to your specific situation. We'd love to help. Folks, we're going to go a little break here. When we come back, we're going to talk about the other side of these pitches that are sold to you, and these are annuities and how they guarantee you these seven, eight returns, and I'll talk to you about the truth about those were. We'll be right back after a few words.

Thank you for tuning in. This is Gabriel Shahin, certified financial planner and your host of More Knowledge, More Wealth, here on every weekend talking about all important topics of personal finance. Our goal is to give you the knowledge you need to increase your wealth.

Now, I want to talk to you today and continue the conversation as I was talking to you about insurance products being sold to you folks, and the most popular one I've seen lately is indexed universal life. I've seen people who bought that one or two to three years ago that are coming into our office finally seeking a second approval. They've paid $10,000 on an annual basis over the past three years and have virtually nothing to show for it, even when they were guaranteeing you that you won't lose money and you can only make money on these things, and on top of that, you got life insurance? Folks, you are overpaying for it and it's sad when you see this because there's always a cost for insurance. There's administrative costs, because you got to pay the commissions involved, and where did all the money go that you put in for the first few years, almost 10 years to be exact? Only to the person selling you the junk and, I'm sorry, but the real answer is why are you getting advice from somebody who only gets paid if you buy it. Think about that for a minute.

You want to do the research in advance, and if they're selling you, pitching you, "Hey, you want help with retirement? Why does life insurance? Folks, it sounds weird, folks, it is, so this is where you need to get a second opinion. This is what I was trying to save you on because I'm looking at these indexed universal life policies and they are a joke and they're being sold left and right. Be careful. This industry is not right. It's not fair there. I mean, they're ... I say it's shady, and I hate to say that because I have to categorize myself in these people's same industry, in the financial services industry. But we're a non-commission fee-only, not fee-based, stopped saying fee-based. I know that's what you're thinking. Fee-only advisor. We don't carry licenses that allows us to get commissions. So we're not fee-based. We are fee-only, which means we can only get directly paid from our client. No other third parties. Clients pay us directly.

Versus these people that say, "Oh, you don't pay me. The insurance company pays me," which is an absolute joke because you are paying a commission one way or another. Who cares who you pay the commission to? It's going to the person who sold it to you. I don't care about the wraparound way of doing it. So, yes, I do get riled up about it because it's not fair. It's not right. It's not ethical, but this is how it works. And I know that. I'm not happy about it, but I know that and I'm just trying to protect you, what's out there because I get sick and tired of having to clean up somebody else's mess, and then you leave the meeting thinking," I can never trust another financial professional again." And that's as a financial professional, the good guy, given you the right answer on what to do. But we're the bad guy because now the previous person ruined it for everybody else.

These people are insurance sales agents. There's three different levels of advisors: insurance sales advisors, which aren't even advisors, insuring sales, commission reps, then there are stock brokers, and then there's registered investment advisors and firms like us. There's two types of RIAs, registered investment advisors, are fee-based and fee-only. Fee-only is the one where you can't make commissions of any kind. The fee-based ones claims they have to do what's in your best interest and be a fiduciary, but what they don't tell you is that they don't have to be a fiduciary at all times.

So it's a sad industry, folks. It's not very transparent. This is why I recommend giving a call to a fee-only advisor, and we offer one to two meetings, one to two hours at no cost. We love to help, relate the show to your situation. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird, where we can help put together an assessment and analysis of whatever you have. That way we can show our value and maybe you want to work with us long-term.

So the other side of what I want to talk to you today about was annuities. Now, annuities is a bit unique. They claim, they pitch you on this rider that says guaranteed income growth rider, which says no matter what happens to the stock market, it goes up, you make money. It goes down, you make money. It goes flat, you make money, and they'll show you from 2000 and 2009, which is over a decade ago, and they'll tell you, "Look, if you put a million dollars in the stock market, you only have 900,000 after 10 years. But if you put a million in this thingamabob, which is called an annuity, your million would have been what? $2 million. How great does that sound? Well, okay, yeah, sure. It sounds great. Sign me up. But what they don't tell you is you can't just, after 10 years, take your $2 million out and walk away.

"Hmm? That's what they said." Oh no, no, no, sweetie. That's not what they said. What they said was it's an income rider. So what the heck does that mean? Well, What that means is depending on your age, you're able to pull off that, not million, but $2 million amount that they claim you have. By the way, if you still would have taken out your money after the 10 years, you wouldn't have a million. Remember earlier, you would have 900,000? You wouldn't even have that. More like 800,000. Why? Because all the fees that would have taken it and it's still invested in the market, these variable annuities.

So what's this whole pitch that they're telling you about this guaranteed 7% over 10 years? That's just if you want to draw an income on it for life. And if you are 75 years old, you're roughly able to take 5%. So if you're 65, put a million dollars, it grew to $2 million, at 75, you can pull 5% a year, which is a hundred thousand a year per life. It doesn't grow after that. And that's it. And as it dwindles away at the principal, if you die, it goes to nothing. And certain annuities doesn't have a death benefit rider, which means you die the very next day after taking out the money, all that money goes to the insurance company. Mm-hmm (affirmative). Annuities are actually the exact opposite of life insurance. Life insurance, they never want you dead because if you die, they have to pay the insurance. An annuity, they want you dead as soon as possible because then they keep the money and they stop paying you.

By the way, folks, if you're just joining us, you are listening to Gabriel Shahin, certified financial and your host of More Knowledge, More Wealth, here on every weekend talking about all important topics of personal finance. So today we are discussing insurance products, because they're trying to sell you on the doomsday of everything going on at the market, so on and so forth, and I'm trying to protect you of what's out there because it's ridiculous. Because what happens is, and people come to us through the NAPFA network, which is a fee-only network, because they find us after they've been burnt. I would like to prevent you from being burnt and just go find a true fiduciary who has to do what's in your best interest 100% of the time versus having to find us after you've been burned.

So we are talking about annuities right now and I'm trying to explain to you that you get the guaranteed growth only on the income amount. You cannot take your principal from that. That's how it works. Now, the important part with this, of course, the most important part, is that it's based on income. And so if you're thinking about putting money at 50 and taking it out at 60, you're not going to get that 5%. You might get under 4% because it has to be through your life expectancy and the IRS helps put these tables together.

So think again, folks, and let's put this into context. Let's just do simple math. You put in 100,000 and in 10 years, so let's just say, you're what? We'll call you 60 years old. You put in $100,000 into this annuity. After 10 years, your $100,000 is on paper with $200,000. You know, we'll just be generous and say you can pull out 5% of 200,000 for life. So now you're 70 years old. You take out 5% of 200,000, that's $10,000 a year. Over 10 years at $10,000, you take out $100,000. We could think about this. For the first 10 years, you got nothing. The money grew. The next 10 years, you took out 100,000. Well, that was your initial investment? So 20 years ago into this thing and you just got your principal back. Now, you're 80 years old and you just got your principal back. Congratulations.

Let's now go another 10 years. You take another $100,000, and now you've taken 200,000 out of your account of your original investment of 100,000, so you doubled your money in 10 years. It grew. You took out, in another 10 years, you got your principal out. On another 10 years, you doubled your money. You took out another $100,000. So over 30 years, you doubled your money. Whoop dee doo, that's a 2.40% rate of return and now you're 90 years old. You get what I'm saying with this? It's a return of principal product.

Don't be fooled by this business and the reason, folks, I bring this up now is because markets are volatile, and with volatility insurance products come out. And this is when we start selling it. This is when they start making money. This is when the free dinner seminars start coming out. Beware. If you need a second opinion, we're more than comfortable to offer that for you. We have offices all across California, other states, and we help people nationwide. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird. Or, visit our website at falconwealthplanning.com. That's falconwp.com, like the bird for short.

So, folks, please take a look at your situation when you're being sold to something. If you notice, I sell brain here, right? That's what we do. That's what fee-only advisors do. [inaudible 00:21:29] product, and if it sounds too good to be true, and when they sell product that means they make a commission from it. And I have no problem with people making commissions, just make it fair. Make it honest. Make it transparent. And there's a reason [inaudible 00:21:40] state agencies, SEC says there's a beware list, a watch list, of things you have to be careful, things that are often misrepresented, and some of the biggest ones are insurance products like annuities, like indexed universal life policies. Also, these real estate REITs, these private transactions are also things you have to be on the look out. But these are the things that you have to be careful of, and it's sad that you have to be careful of it. It really is. And I feel bad that you do.

But you have to be your best advocate. And what I see from people is they just often trust what they see on the internet, and what they see on TV, and what they hear on the radio. If you notice, I'm giving you facts of how things work. There is no sales pitch. And if you want help relating this show to your specific situation, to truly see what you have out there and what you need to be unaware of, what you need to look out for, give us a call. We can help. We do this on a daily basis. We normally charge for this. We'll give you one to two hours, one to two meetings, of our time at no cost. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird. We'll be happy to help.

Folks, as we close out this show, this was a fast, fast show. Those 30 minutes really fly by. I want to thank you for tuning in with us this weekend. You can always reach out to myself or any one of our colleagues here at Falcon Wealth Planning. Our phone number is 855-963-2526. That's 855-96-FALCON, like the bird. Or, visit our website at falconwealthplanning.com. That's falconwp.com, for short. Call us. We'll have a confidential, personal, confidential conversation to help relate this show to your specific situation. And don't forget to tune in every weekend as we go over all important topics of personal finance, where our goal is to give you the knowledge you need to increase your wealth. We want to thank you for joining us. We want you to enjoy your weekend. Have a great week and God bless.