Retirees often find themselves with considerable nest eggs, often hundreds of thousands of dollars, but little expertise in how to derive needed income from their cash piles. The choices seem limitless: mutual funds, dividend-paying stocks, municipal bonds, bond ladders, reverse mortgages … it’s no wonder that inexperienced retirees turn to any source of advice they can find.
Investment seminars are offered across North America, and they might seem like a good idea: free investment advice, with a free meal kicked in. Thousands of retirees attend such seminars every year and, to be fair, many organizations offer legitimate seminars that provide sound investing advice. More often than not, however, a “seminar” is a thinly disguised sales pitch for investment products that are expensive, risky, and not suitable for retirees who need a safe way to squeeze income out of their savings.
Some seminars are by invitation only, but many are open to the public; they are advertised as seminars that offer objective advice on attaining a secure retirement, financial planning, estate planning, and other broad topics of interest to retirees. Often, a sense of urgency is implied in the advertising, with tag lines such as “limited seating available” or “call now to reserve.”
However, such seminars are usually staged by insurance or investment firms, and presented by brokers seeking sales commissions. Although most seminars do not make direct sales, attendees are encouraged to book follow-up meetings to open an account and invest in an expensive product such as an indexed annuity. The presenter, rather than providing objective and reasoned advice, will make exaggerated and misleading claims about the product that he or she is selling, promising unrealistic returns and guarantees. Many promise annual returns of 12 percent or more on an investment, which is simply unrealistic in today’s financial environment.
Often, the investment products hawked by seminar presenters are unsuitable for most of the retirees attending; most retirees should invest conservatively, and many are risk averse to begin with. Also, the annuity products promoted at these seminars are illiquid: once purchased, they cannot be converted back to cash without paying substantial penalties. However, seminar presenters “advise” all attendees to purchase the annuity or other product being hawked, regardless of each individual’s investment needs, aversion to risk, and liquidity needs. And some seminar practices are simply fraudulent.
The most common product promoted at such seminars — the indexed annuity — is usually not recommended by legitimate financial advisers. An indexed annuity may sound like a good deal: after investing a sum of money, the investor is paid a return that is pegged to a market index, such as the Standard and Poor’s 500 Index, which tracks 500 commonly traded stocks. If the market goes up, your checks go up; if the market goes down, you are still paid a guaranteed minimum. However, there are many down sides. Your gains are often capped as well, sometimes only 7 percent. Stock dividends, a huge up-side in a volatile market, are often not included in calculating gains. If you need to withdraw your money, there is a substantial early withdrawal penalty, starting as high as 15 percent of your investment; “early withdrawal” can be defined as ten to fifteen years. And, of course, purchasing an indexed annuity always involves paying a large sales commission — which is why brokers posing as “financial advisers” are so eager to sell them to you.
The Securities and Exchange Commission has investigated the practice of disguised sales pitches and brought cases against firms engaged in fraudulent practice. Nevertheless, these seminars continue to be offered. If you have a substantial nest egg and are unsure of the best way to invest it, bear in mind that there is no such thing as a free lunch. Hire a legitimate financial advisor to examine your assets and your needs, and give you real advice.
An investment calculator can be a wonderful tool if you are contemplating investing but are not sure which scheme will give you the best financial rewards. With so many companies now advertising on the internet, it is easy to gain access to a great many investment opportunities.
Many companies who are available to handle your investments will feature an investment calculator on their website. These are usually easy to use and will give you an idea of what return you can expect if you put your money with them. The calculator is there to help you get a clear picture of what you can expect back after a certain length of time. There are many variables which you can enter into the equation and all of these can be taken into account when calculating the results.