Banks, insurance companies, car insurance companies, mutual fund companies, mortgage lenders and similar institutions all employ strategies designed to give them the advantage.
I call them the 5 Rules of Financial Institutions: 1. All of their advertising is designed to make you feel as comfortable as they possibly can .
“We have a long track record,” “See our high ratings,” etc. 2. Once they've gained your trust, and have convinced you to start giving them money, they want to get that money on an ongoing basis .
Think dividends to reinvest, dollar cost averaging, short-term mortgages, etc. These provide a systematic flow of money into the institution. 3. Once you’re giving them money on an ongoing basis, all of their strategies promote hanging onto the money for as long as they possibly can .
Think compound interest—the longer they have your capital, the more interest for you, but the better for them as well. 4. Once you’re ready to distribute the money, their strategies are intended to limit the amount of money you take out .
You might get taxed, you might get penalized, you might run out of money, etc. 5. They always transfer risk from themselves to the client .
A lot of the fee structures, insurance costs, deductibles, ATM fees, etc., pass the fee and the risk of that fee to the individual.Related: How to Protect Your Most Important Asset
For more on these rules and how you can guard against them, come to our FREE Retire ASAP
(As Soon As Possible and As Safe As Possible) Retirement Strategy Workshop
on February 19 and 20. You won’t want to miss it!