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« Retirement Income Planning 101 | Main | The Lake Wobegone Effect on Investors »
Saturday
Apr032010

Make Sure You Buy and Are Not Sold

I enjoy watching a really good salesman at work.  Even when he has me in his sights I still  find the process fascinating.  A talented salesman seems able to anticipate their "buyer's" questions or objections before they are even made.  A good salesman is always a step ahead with their answers, explanations, or counter-points.  I have never fancied myself to be much of a salesman. I never experienced much success with the little selling experience I have had, nor did I much enjoy it. 

Volumes have been written about how to be a good salesman.  When I googled "how to sell" I received 460,000,000 responses.  Selling is an old and honorable profession, and if you've got it, someone sold it; so I do not intend to denigrate salesmen/women, but I do want to make some observations about "selling" and how it affects our lives.

Virtually all expert salesmen agree that the best salesmen/women are good listeners.  As good listeners they are able to determine what their customers' needs/wants are and then tailor their presentations/sales pitches so as to show how their products can fill those needs.  Want to stay young? Want to be cool?  Want to be envied?  Want a secure retirement?  Want your children to succeed in school and life?  If you can answer "yes" to any of these questions, a salesman somewhere nearby has the product for you.

The best salesmen are totally committed to, and believe in their products.  They see no grey areas; they see only that your life, as well as theirs, will be better once you buy their product.  They do not allow themselves to see any downside for you; they are convinced that there are no better alternatives.  They do not allow any doubt in their minds, and hopefully not in yours.  And salesmen are always selling.  They don't really care if you are ready to buy, they are always ready to sell.  We are always being sold to in newspapers, in magazines, and especially on television and on the internet.  Good salesmen sell; they hope you buy, but they are going to "sell" anyway.  For a good salesman, eventually someone always "buys."

I was reminded of the effects of "selling" recently as I spoke with a friend of mine.  He recently endured the heartbreak of divorce and has been trying to get his financial life back in order.  He asked me to take a look at his finances and offer any suggestions I may have.  As I was reviewing his holdings I noticed that he owned an annuity.  He was able to tell me what company had issued the annuity but not much else about it.  He was not sure how much it was worth, did not know how long the surrender period was nor what the surrender penalty would be.  He was not aware that the IRS usually imposes a penalty on money withdrawn from annuities prior to the age of 59 and one half years of age.  And finally, he did not know what he was trying to achieve when he had bought the annuity.  In other words, he actually was "sold" the annuity rather than having "bought" the annuity.  Some variable annuities are especially complicated and complex.  They come with an assortment of fees and expenses, and sometimes their buyers little understand what they are getting, what they are paying, or what they are trying to accomplish when they buy one.  Even when they may make sense for a buyer, they are difficult to fully understand.  They do pay a nice commission to those who sell them however.  Thus, variable annuities (especially the indexed variety) are usually "sold;" rarely are they "bought."

This seems to happen all to often with financial products.  Unless the financial products consumer educates himself somewhat before talking with a good salesman, he may find himself being "sold to" rather than "buying."  Buying a product implies that the consumer knows what he wants and what he wants to accomplish with that product, while being "sold to" implies that the consumer allows the salesman to make those decisions for him.  All too often when a product is sold, the salesman's interests and biases play a bigger role than they should; if the product is bought by an informed consumer, that is not nearly as likely to be the case.

If you cannot explain a financial product fairly succinctly to your spouse, you probably don't need it.  Most financial products that we as consumers really need are fairly straight-forward and logical; they make sense.  We can understand what we are getting when we "buy" them.  If you have to be "sold" a product, a product you cannot easily understand or explain, you very likely do not need it as much as the salesman needs to "sell" it.  Make sure you are "buying"" and not being "sold" to!

 

Fly/Drive Safely

9 April, 2010

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