The official site of author Ed Lin.

Premium Money Scams

Posted by on Jan 17, 2011 in Ed, Journalism, Money | 1 comment

#1 Lesson: Never pay cash when you can use credit.

I saw Guided by Voices play on Dec. 30 and Dec. 31 and wanted to blog about it, but a phone call changed all that.

It was from the company that handles my 401(k) retirement account.  A woman informed me that I now qualified for a new level of service — a “premium” level, in fact. She wanted to assign me a personal account executive right away.

Immediately suspicious, I said I had to go and that she should send me information in the mail about the premium services.  I work in financial journalism. I don’t trust anything not in writing, and even then I remain vigilant. The Wall Street Journal regularly publishes round-ups of securities violations among nearly every brokerage. The most common violation seems to be generating extra trading in a client’s account to drum up more commissions — in other words, the brokers were making money by moving it around instead of growing a client’s account.  Those caught pay a fine and “neither admit nor deny” guilt.

Well, when I did receive a pamphlet in the mail, it was as bad as I had thought, and it didn’t even come with any of the extras I would have expected.  (How about a free cup of coffee in the mornings from the branch offices?)

On the first page, I was notified that I was eligible for “complimentary guidance consultations from a Premium Services Account Executive, who’ll take the time to understand your needs and help you make financial decisions you can feel confident about.”

Free financial advice! Great, right?


The footnote (number two out of a total of 15) told me that, “Although consultations are one on one, guidance provided by [XX]* is educational in nature, is not individualized, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.”

In other words, this premium level of service entitles me to one-on-one sessions of high-pressure sales pitches. Why, this so-called account executive doesn’t even care who I am because everybody getting these premium services gets the same pitch. And even though the footnote implies the need for additional financial advice, the entire pamphlet doesn’t suggest that your account executive is deficient in any way.

The pamphlet also notes that your account executive can help you, “Potentially reduce estate and estate-related taxes.” As a premium-services client I can “Learn how you may control the distribution of your wealth with our estate planning basics.”

Yet, astoundingly, that last statement is footnoted as “Tax and estate planning information provided is general in nature, is for informational purposes only, and should not be construed as legal or tax advice. [XX]* does not provide legal or tax advice.” The seller of this rinky-dink fortune-telling miracle fish also has the disclaimer that such fortunes are for informational purposes only.

Again, no mention of free coffee!

As you can imagine, the rest of the pamphlet details all the great things this account executive can do, including investment and tax-planning decisions rife with conflicts of interest!

This annoys me to a great degree. For people flustered with making investment decisions, this free service may seem like a lifeline, but like most things in the world (and especially in the world of finance), when someone seems to be throwing you a line, they are really trying to feed you one.

In fifth grade I had a teacher who had a few rental properties but his tenants were incompetent and often filled out their rent checks incorrectly, rendering them uncashable. As a favor to our future landlords, he made us spend a week or two writing out checks and spelling out legibly the dollar and cent amounts. That was the full extent of personal finance that I learned in public school. College, too.

Personal finance is something that one has to pursue on one’s own. You don’t learn it in law school or medical school. Which is why a lot of smart lawyers and doctors get scammed by these account executives who are busy making trades in their accounts. One does break a sweat every now and then from buying and selling. If the lawyer or doctor asks about something, the account executive has some language ready to basically ask them, “What are you, stupid?” That usually ends it because lawyers and doctors certainly don’t fancy themselves as stupid, and the account executive goes back to making trades.

Of course, you don’t need to be a lawyer or a doctor to be scammed. Shoot, I’m a writer and a journalist. I don’t have a whole lot of money in my 401(k), but after working and contributing for 18 years, I now qualify for premium services.

But not free coffee. (Why do I keep asking? I want some freaking free coffee, and I’m willing to tune out a short sales pitch for a good cup!)

Learning how to manage your personal finances is, well, a personal matter. Only you can determine how much risk you’re comfortable with. Only you know what causes you care about (investments in “vices” such as alcohol, or China, or companies that oppose same-sex marriage, for example). Only you know what fee structures you want to pay.

You may say, “Hey, Ed Lin! I’m busy as hell, and I don’t want to deal with money stuff! I want to leave it to the pros!”

A lot of other people felt that same way when they had Bernie Madoff ** manage their assets.

We have arrived at a time and place when an individual can read and become very savvy. One is capable of trading options and other derivatives easily.

Yet for many people — including very smart people — the world of finance remains murky and seems best left unexplored.

If this is you, you may get a phone call soon — from your new account executive offering free premium services.

How can you counter this? There are a number of fine publications, including,*** that you may choose to read on a regular basis. The Wall Street Journal Guide to Understanding Money and Investing is an excellent place to start and you can buy it for 1 cent plus shipping and handling. Understanding Wall Street by Jeffrey Little is also great for starters. I’m sure others have their own favorites.

But this is not a sales pitch, and I am not your account executive.

*Overlay your 401(k) administrator here.

**It is true that it is unfair to paint all asset managers with the Madoff brush. Yes, some people do want help from an objective personal-finance adviser. If this is you, then you need to go to a “fee-only” adviser. These advisers derive their fees from a percentage of your assets. They are motivated to make your assets grow because it means more commission for them. Avoid “fee-based” advisers — on top of getting a percentage of your assets, they also are paid by fund companies when they steer your money into their funds. If you don’t understand everything, and your adviser can’t or won’t explain fully, get another adviser.

*** I work at, which is owned by News Corp., a company that also owns The Wall Street Journal.

One Comment

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  1. David Di Pinza

    My Taiwanese mother-in-law has been investing in stocks in Taipei by reading the newspapers and watching TV for more than two decades. She does everything by phone and personal visits. She hates the Internet (for the most part — because she can now instant message her daughter 7,000 miles away at 5 in the morning). She educated herself in the ways of stocks and bonds and insurance. Everyone can do this with a lot of patience and diligence. At work I am amazed at how little my co-workers understand how their 401(k) s work and how to choose which investments are right for them — or even how to navigate the web site. It seems that they have never heard of the “buy and hold” strategy, but panic every time there is some bump in the road. Or know about shares or dividends or trading fees. Oh well, I try to help.

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