231 – Financial Wolves in Sheep’s Clothing

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Financial Wolves in Sheep’s Clothing

Check out some of the top signs to look for in predatory financial advisors aka wolves in sheep’s clothing.

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Have you ever been approached by someone offering financial returns so great that it must be too good to be true? Bob and Shawn discuss the patterns and tactics that these financial wolves may use to lure you and your finances into unwanted territory. Some of these tactics include the ever famous “free, luxury steak dinner” to entice you and peak your interest.

However, these financial advisors can be just like “wolves in sheep’s clothing” when it comes to their manipulative tactics that they use. Many of the products they promote are rarely benefiting the consumer, and they actually benefit the advisor more than the client. When you begin to look through the minefield of promises that really sound too good to be true (because they usually are), you begin to see a pattern.

Mentioned In This Episode

Shawn (00:00):
They try to get you to, “Well, don’t talk to anybody else. This is a limited time deal.” Basically everything that they can to get you to sign as quickly as possible. Because if you run it by someone who cares about you and kind of knows what they’re doing, they’re going to see through this, they, they’re going to advise you. “No, this isn’t a good idea.”

(00:18):
Welcome back to Christian Financial Perspectives. I’m Shawn Peters. I’m joined today by Bob Barber and today we are going to be covering financial wolves in sheep’s clothing. And before we really get into any scriptures or anything else, I noticed, Bob, that you brought some stuff for show and tell. And for those listening, we’ll make sure to describe what he’s got. But what you got here?

Bob (00:48):
Now, Shawn, I know that you like to eat a lot. So

Shawn (00:52):
How do you know that?

Bob (00:52):
Hold yourself back when I show you this. Okay?

Shawn (00:54):
Have you personally seen that and can testify?

Bob (00:57):
Y’all know Shawn is my son-in-law. So I’ll never forget the first time he came to eat at our house and he went and started in a clock position and he went all the way around and he ate everything on his plate. And then he looked up and he says, “Can I have another plate?” And we said, “Yeah, no problem.”

Shawn (01:12):
And you realize that’s one of the few ways to get me to stop talking is to make sure I’ve got food in front of me.

Bob (01:18):
So I want you to picture this if you’re listening to our podcast, but if you’re watching our YouTube channel, okay, Shawn, you see this?

Shawn (01:25):
Oh, come on Bob. It’s almost lunchtime. Don’t be doing that.

Bob (01:28):
Isn’t this just a picture of a beautiful steak? And lemme…

Shawn (01:33):
It’s one of those fancy steaks where you don’t get as much, but I guess it tastes better.

Bob (01:37):
Here’s another one.

Shawn (01:39):
Oh, that looks good, too.

Bob (01:41):
I know. I know.

Shawn (01:41):
It looks like maybe that was that salmon on some fried asparagus sticks. That looks good.

Bob (01:47):
It is really good. You’re invited to a complimentary event for retirees or soon to be retired. I get these, Shawn.

Shawn (01:57):
If I bring someone over 60, can I go get a free one? Would they let me in?

Bob (02:03):
I don’t know. When you open it up and you start seeing some things in here anyway, if you can’t see this, just picture a beautiful steak.

Shawn (02:11):
Think the big six by nine postcard. Maybe it opens up to a larger piece. But pretty much all you really see on it is, “Oh, look how good that entree looks.”

Bob (02:21):
Now Shawn, I remember the first time I met you, too, we went to the Olive Garden. You had a bunch of bowls of soup.

Shawn (02:26):
I had a few.

Bob (02:27):
Yeah, you had a few.

Shawn (02:28):
It was double digits.

Bob (02:29):
Yeah. They were betting on how much you were going to have.

Shawn (02:32):
Hey, I finished that last bowl so that guy would win the pool.

Bob (02:36):
I think about the steak and how they send you this. You get these invitations with these beautiful pictures of steak in them. Then I thought about soup and I thought about my wife can make really good stew. And this brings me to a scripture.

Shawn (02:51):
We actually have a scripture about stew or soup. Yeah. So Genesis is 25:30-34, “He said to Jacob, ‘Quick, let me have some of that red stew. I’m famished.’ That is why he was also called Edem. Jacob replied, ‘First, sell me your birthright.’ ‘Look, I’m about to die,’ Esau said.”… By the way, a little dramatic.

Bob (03:11):
Yeah, I know.

Shawn (03:12):
Anyway, “‘What good is the birthright to me?’ But Jacob said, ‘Swear to me first.’ So he swore an oath to him selling his birthright to Jacob. Then Jacob gave Esau some bread and some lentil stew. He ate and drank and then got up and left.” So Esau despised his birthright over some food.

Bob (03:32):
Do you see how food can…

Shawn (03:34):
It’s that short term. He was so focused on his short-term needs and gratifications that he gave up his birthright for a bowl of stew and bread.

Bob (03:45):
That’s what they’re trying to do here, Shawn.

Shawn (03:46):
Yeah, exactly. It’s exactly the same thing. They’re trying to get people to come in and when you get one of these in the mail and it’s all about, look how great this food looks. Well what happens is you then go in and you have this obligation, this sense of obligation. You don’t want to be a mean rude person by taking advantage of this free meal. So you’re like, “Well, I have to hear ’em out.” And again, I mean that is one of the most fitting scriptures I feel like we’ve had in a long time for how close the parallel is to today. It’s still food and it’s still trying to get someone to basically sell their long-term success and future for a nice meal, a one-time nice meal.

Bob (04:27):
As I think about financial wolves in sheep’s clothing, a wolf knows the power of words and emotions to manipulate others. And they use fear to fuel insecurity. And then what do they do? They pounce. And we want to protect you from that. There’s another scripture here I’d like you to read for us, Shawn, from Matthew 7:15-20.

Shawn (04:51):
Yeah, I’m not going to read quite the whole thing. It is a good scripture, though. “But watch out for false prophets. They come to you in sheep’s clothing, but inwardly, they’re ferocious wolves.” By your fruit you will recognize them.” And then I’m going to jump down to 18. “A good tree cannot bear bad fruit and a bad tree cannot bear good fruit. Every tree that does not bear good fruit is cut down and thrown into the fire.”… And there’s the important part… “Thus by their fruit, you will recognize them.”

Bob (05:19):
So we’re going to go over a lot of disguises that these financial wolves use because the first disguise is right here.

Shawn (05:26):
You could say financial wolves or predators.

Bob (05:29):
Yeah, they use free steak dinners. By the way, this invitation is a very nice invitation. I know because I’ve had companies approach me, we’ll send out 10,000 of these for you and you’ll get a quarter percent return and we’ll get 25 to 30 people there. That’s like, how much is that going to cost? Well, the mailers are going to cost about a dollar a piece.

Shawn (05:52):
And we also send mailers out. And the thing is, the more you send out the cheaper it actually is. So sending out 10,000, it’s maybe a dollar a piece. But then think about it, you get one person that does a hundred thousand dollars annuity of some kind or something like that and it’s a 10% commission. There you go. You’ve completely paid for the entire thing. And that’s with one person.

Bob (06:14):
Yeah. It’s not just the cost of these, but just even the kind of steak places that they’re advertising. Those are $70 plates and you have a couple, so they’ve got a lot of money invested in you before they even talk to you about what you’re going to do with the financial.

Shawn (06:33):
They send out these free steak dinner invitations or salmon, whatever, but it’s a nice steakhouse kind of a deal just to lure you in. And then they say you will pay nothing for their services, which is such a lie.

Bob (06:46):
That is just so interesting how they say that. And the reason they say that is say, you’re not paying anything for our services. The company that we place you with is paying us. But yet, if you want to get your money back, so if you put say a hundred thousand dollars in, you want to get your a hundred thousand dollars back. Oh no. Well, we could only give you back 90,000 of that. Why is it you can only give me back 90?

Shawn (07:08):
Well, because we paid the guy who sold it to you 10 grand. So effectively it’s that surrender fee is going to be based on the surrender time period and what the commission was. So for example, if there’s a 10 year surrender period and you’re trying to get the money back a year later and they say they’ll only give you 91,000, well that was because – that’s how you know it was a 10% commission because that’s when they paid out.

Bob (07:35):
9 to 10 right in there. And the company’s going to make this back too because once they get you in, they’ll promise you these rates. And then we’ve seen, I’ve had, I don’t know how many, I can’t even count how many have come to us after this has happened. And they’re like, the next year I’m making 2% or 3% they’re not making at all. And I said, that’s the company’s keeping the other.

Shawn (08:02):
There’s a lot of hidden fees. There’s the, which we will get into it.

Bob (08:06):
This is the third point I want to point out is that these financial wolves represent companies that they’ll put fictitious values on paper. So you’ll open up the paper and you’ll say, ah, it says it’s worth 110,000. I put in 100,000.

Shawn (08:23):
I just barely started six months ago.

Bob (08:26):
Or they’ll say a 10% bonus. But then again, if you want to liquidate that, they’re not going to send you that. So, that’s a fictitious value. That’s not a real value that can be liquidated.

Shawn (08:37):
So you can look at it as at 110,000 in this case value a year later if you want to withdraw it, well guess what? You’re going to get 91.

Bob (08:43):
Or 92 or something like that.

Shawn (08:45):
Yeah, 92, they’re not going to give you the full 10,000 bonus. They’re going to take out 8-9% for your surrender penalty. And so yeah, it’s just a fictitious number. I believe the other word for that is a lie. It’s false.

Bob (08:58):
These companies, they pay very high commissions. And so there’s a real incentive for these financial wolves to sell these types of products.

Shawn (09:07):
They’ve only got to sell a few to make good money.

Bob (09:08):
We just mentioned about the upfront bonus.

Shawn (09:11):
Again, they’re fictitious. It’s just a draw in.

Bob (09:14):
It’s only as good as the paper it’s written on, though.

Shawn (09:16):
When we were recording this, at least we are shortly coming off of Memorial Day and I saw these advertisements for the prices for, I’m not going to name the place, but it was this type of resort that said like, “Oh, it’s 30% off. They’re doing memorial day sale.” And then when you look at the final price, everybody’s commenting on the post because, especially all the locals, that’s the same price you’ve had for the last year and a half. The prices that you just raised the price and then said it’s a discount of 30%. So it’s kind of like the same idea. It’s nonsense.

Bob (09:52):
I know it really is. Another one is they’ll promise you an interest rate. And this is what I’ve seen a lot, too. And they don’t really disclose this and you got to think about this. They’ll say, well, you’re making a 7% return on your money, but not really because what they’re doing is they’re promoting it as an interest rate, but it’s just a return of your own money.

Shawn (10:19):
So a return of your principal.

Bob (10:21):
Return of principle. So if you look at it deep, let’s say they’re going to give me back 6% a year, that’s what they’ll say. They’re going to give me back 6%.

Shawn (10:28):
So on 100,000 you should be getting 6,000 in income.

Bob (10:31):
Right.

Shawn (10:31):
Right.

Bob (10:31):
That’s your own money. They’re giving you back your own money. Isn’t that nice of ’em? So be careful of that. They’re just giving you back your own money and they disguise it like it’s an interest rate. Another thing that you really want to be careful of is how they’ll promote these unreasonable fixed returns.

Shawn (10:54):
So they’ll disclose something that looks more like a normal interest rate of some kind and let’s say they do the 6%, but yet you look at interest rates of what’s actually comparable and paying. And you can look that up for free. I mean just Google interest rates so you can kind see what the market looks like. Well, if they’re promising you 6% and you’re looking at rates and they’re between 3-3.5%, okay, well something’s up. That’s way too big of of a gap. Obviously there is some sort of string attached.

Bob (11:25):
You’ve got to be careful of letting your own greed get in there. I remember Bernie Madoff and people were making 10% or 12% year after year after year no matter what the market was. And then they found out it was the biggest Ponzi scheme in history.

Shawn (11:38):
Well, it’s one of those where it’s so good and then people get caught up in the – effectively you stick your head in the sand and it’s so good that I don’t want to look too closely at it. Even if in the back of your mind you’re like, something’s off, something’s wrong this, but you’re like, but I don’t want to rock the boat. I don’t want to look too close and then I don’t get to enjoy this return. And I think that’s what happens. It’s like that psychological effect.

Bob (12:04):
You’ve got to be careful. Another thing that they’ll do is they’ll promote that you’re going to get stock market like returns, but then when you look at the fine print.

Shawn (12:12):
Without risk. Stock market like returns without risk.

Bob (12:15):
But then when you look at the fine print, they put a cap on it. And we’ve seen this many times, too. So the stock market in good years, our aggressive growth fund, we’ve had a year where it went up 18, 20, 25%.

Shawn (12:29):
Yeah, just in one year.

Bob (12:29):
In one year. Now it doesn’t do that every year, but.

Shawn (12:31):
No. And some years it might be down quite a bit.

Bob (12:35):
Well, it’s going to go up and down, but here’s what they’ll do. They’ll promote it and they’ll say, well, you’re never going to have a down year. You’re only going to have an up year. But then the up year is capped.

Shawn (12:44):
At say, 5% .

Bob (12:46):
No. If you’re lucky.

Shawn (12:48):
Yeah, I mean it could be 2%.

Bob (12:51):
And they have different ways of doing this point to point or monthly average. And they do all these different formulas. And when I look at these, what I’m seeing is about a 2% or 3% return overall seems to be the average. Some of ’em may be 5%, but if the market’s making 10% or 12% and they tell you we’re investing in the market and they’re giving you 5%, where’s the other 7% going?

Shawn (13:15):
To them.

Bob (13:16):
That’s high expenses.

Shawn (13:17):
See, the thing is when you’re looking at these returns and you’re looking at the cap that you hit on this product you’ve invested in, the issue is that they know that if they lock you into say that minimum of five years or that minimum of 10 years without incurring massive penalties, they know that by capping an investor at 2% to 5%, even though they have to bear the full downside in a down year, they know that over a longer period of time, especially 10 years, they’re going to make out like a bandit on average. So the little 2% to 5% they had to pay you and you didn’t participate in the downside, they’ve more than made up for it. Not to mention all the other fees.

Bob (14:02):
I would invite anybody to go back and look at the past podcasts we made one several weeks ago, or maybe it was about a month ago. We talked about the history of the markets and what are the history of the markets as a common theme? It always goes on to newer highs. It recovers and goes on to newer highs. And then I say this last one, it’s just be very, very cautious of all the manipulative sales tactics that these financial wolves use. They use a lot of them. They’re taught them. And also…

Shawn (14:31):
They try to get you to not leave without signing. Especially at that dinner. They try to get to not get, yeah, or get an appointment. They try to get you to, “Well, don’t talk to anybody else. This is a limited time deal.” Basically everything that they can to get you to sign as quickly as possible. Because if you run it by someone who cares you and kind of knows what they’re doing, they’re going to see through this, they’re going to advise you, “No, this isn’t a good idea.”

Bob (14:58):
And the last thing I want to mention today, besides these high commissions that these companies offer these financial wolves to represent their products, they have top producer conferences, they have vacations.

Shawn (15:11):
If uou sold a certain amount.

Bob (15:13):
Four star resorts, they get big year end bonuses if they sell a certain amount of their product. They give them expensive gifts like a set of golf clubs. And the list just goes on and on. Man, we’ve got to be careful how we walk around after this. We’ve really exposed today. I mean, hopefully there’s not one waiting out at the door for us to hit us, but you just got to be so careful of all these manipulative sales tactics that they use. And next time you get one of these free steak dinner seminars, throw it in the trash.

Shawn (15:51):
Or recycling if you’re a recycling.

Bob (15:52):
Yeah, exactly.

Shawn (15:54):
It depends on where you’re located.

Bob (15:56):
That’s where it belongs. And don’t get sucked in to their manipulative ways.

Shawn (16:04):
Yeah. Don’t try to capitalize on the $1 they spent to send you that postcard and throw away your future because of it.

Bob (16:12):
I hope this has been helpful for you today. We’re a fiduciary fee-based advisor. No one pays us but you. We’re paid by you. Everything’s disclosed upfront.

Shawn (16:22):
And we’re only paid for what we do. So any client that if one of you listening now are not a client and you decide to become a client and two and a half months later you’re like, this isn’t for me. Well then you get refunded that last half of the month for the quarter. We only get paid a quarter of the year.

Bob (16:39):
Whatever the value is that you see, that’s the value you get. There’s no games here. We play straight. It’s right up front. If you’d like to learn more about our services, you can give us a call at 830-609-6986 or you can text that number and we would invite you also to go to our website to www.ChristianFinancialAdvisors.com. Whatever you do, look for a fiduciary fee-based advisor. Stay away from commission-based. That can create a huge conflict of interest. That’s all for today.

Shawn (17:10):
And one final thing, if anybody is trying to convince you to do something and they don’t want you to talk to someone that you trust or to get advice, second opinion, if you will – run, don’t walk, run. Because anyone that is actually being a fiduciary, anyone that’s acting in your best interest, but obviously maybe they’re still in business, but they’re not trying to take advantage of you, they’re not going to be scared for you to talk to somebody else or to get advice from someone else. So, thank you as always for joining us and God bless.

* Investment advisory services offered through Christian Investment Advisors Inc dba Christian Financial Advisors, a registered investment advisor registered with the SEC. Registration as an investment advisor does not imply a certain level of skill or training. Comments from today’s show are for informational purposes only and not to be considered investment advice or recommendations to buy or sell any company that may have been mentioned or discussed. The opinions expressed are solely those of the hosts, Bob Barber and Shawn Peters, and their guests. Bob and Shawn do not provide tax advice and encourage you to seek guidance from a tax professional. While Christian Financial Advisors believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability.