By Dr. Rikki Racela, WCI Columnist
“Are you kidding me?” my wife screamed at me with derision and anger seething in her voice.
“You lost how much? I trusted you. I trusted your friend (referring to my high school buddy and financial “advisor”)! Go back to him and get our money back.” My enraged better half then marched upstairs, each step banging the wood floor with such phenomenal force that I thought it would break.
I had just broken the news to her that we had lost $50,000 in whole life insurance. If there was a time I felt like I should have lied to my wife, it was at that moment, right then. (As an aside, please, please do not ever lie to your wife, finance or otherwise.)
As I sat down on the couch, wiping tears out of my eyes after realizing how much I had hurt my wife by trusting my high-school-buddy-turned-Northwestern-Mutual-financial-advisor, I needed a break. If you read my previous blog post, you know I am a Star Wars addict. Turning on the TV to Disney+, the most recent movie that came up on my flat screen was Revenge of the Sith. As I looked at the picture of Hayden Christensen looking back at me with the red-yellow eyes of a newly minted Darth Vader, I realized at that moment how this painful financial tragedy related to the galactic tragedy in the Star Wars saga:
My financial advisor was Anakin Skywalker.
“Anakin Was a Good Friend”
So says Obi-Wan Kenobi, the man that eventually would be cut down by the lightsaber of that once “good friend.” So would my high school buddy cut me down with a whole life policy. We didn't fight to ensure peace to an entire galaxy or anything, but we did play high school football together and made the Central Jersey Group 4 state championship as sophomores. Just like Obi-Wan gaining ever-increasing trust in Anakin through the trials and tribulations of keeping the Republic together and instilling interplanetary peace, I put ever more faith in my future “advisor” as we worked hard to become competent football players and to propel our team to that New Jersey state championship.
Outside of football, we grew up playing Little League, hung out together, and learned in the same town school system. It’s emotionally impossible not to place financial fidelity in a childhood friend when he becomes a financial “advisor.”
More information here:
Should I Use a Financial Advisor or Do It Myself?
“If You Act on the Assumption That Every Broker, Insurance Salesman, and Financial Advisor You Encounter Is a Hardened Criminal, You Will Do Just Fine”
So says Bill Bernstein—the renowned financial mentor and educator and, given we are both neurologists, a man after my own heart. However, even if I had known this advice in the past, I still would have trusted my buddy with my money. Sorry Bill, I cannot see my friend as a hardened criminal. Neither could Obi-Wan see Anakin as a Sith Lord. It’s because I grew up with my buddy and he earned my trust, and I know his character intimately. He never even got detention (although he did come close when our chem teacher caught him passing jokes during class).
As for Obi-Wan, he never saw Anakin do anything evil throughout Episodes 1 and 2. My ex-financial “advisor” does not have the heart of a criminal. He has the heart of somebody who, well, is my buddy. And Northwestern Mutual knew this well, just like Palpatine sensing the power in Anakin. Insurance companies have a knack for hiring good, nice people. They are using a psychological technique that can counter Bill Bernstein's advice called affinity bias.
Michael Pompian, in a 2016 Morningstar piece, defines affinity bias as “an individual's tendency to make irrational, uneconomic consumer choices or investment decisions based on how they believe a certain product or service will reflect their values.” Northwestern Mutual had used human behavior against me. When insurance companies teach “advisors,” they ask that they hit up their friends and family to sell inappropriate products and high-fee funds.
My affinity bias enabled my buddy to ruin my financial life without me putting up a defense. I thought his shared values of trust, hard work, and integrity for doing what’s best for people would transfer to the investments and “advice” that was offered through Northwestern Mutual. It's similar to how Obi-Wan thought Anakin, being a long-time Jedi companion, could be trusted to resist the tantalizing fruit of the Dark Side of the Force. At least my affinity bias didn’t end up enslaving an entire galaxy! And last time I checked, it doesn’t seem my ex-advisor and I will be dueling it out in the future, resulting in my death.
More information here:
Northwestern Mutual “Financial Advisor” Review & Confessions
It Didn’t End My Life, but Whole Life Insurance Really Screwed Me
I lost thousands of dollars by getting duped. I didn’t get chopped down like Obi-Wan did, but it sure felt like it. At the end of seven years, I was in $31,000 of credit card debt and forcing myself to see more patients to keep up with the $28,000 of whole life premiums. After all this, my cash value in the policies for my wife and me totaled $120,000. But we had paid into these destructive policies $170,000. That is a loss after seven years of $50,000!!! Some investment.
The Dark Side is powerful, indeed. But wait, there’s more. Sort of like Anakin, when he converted to the Dark Side, helped kill Mace Windu, massacred Jedi younglings, hunted down Rebels, tortured Han Solo, and mutilated his son’s hand, my advisor did the following:
- I had been put into a variable annuity within an IRA (stupid to pay for a tax-deferred product that is already within a tax-deferred account!).
- I had a non-true own occupation disability insurance policy that Northwestern Mutual had named “medical occupation definition.”
- I had a term to 80 convertible life insurance policy (a very inappropriate, unnecessarily long, and expensive term life policy).
- I had 529 plans for my kids at a cost of 150 basis points when the self-directed plan is only 10 basis points.
Just like it is close to impossible to sum up the damage Darth Vader had instilled upon the galaxy, so too was it daunting for me to fully assess the financial damage my buddy wreaked on my family’s financial lives. That money was a representation of our hard work, long call nights, and sacrificed time with the kids, and the financial heartache caused by Northwestern Mutual extended to my marriage. Even now it stings.
More information here:
“Strike Me Down and I Will Become More Powerful Than You Can Possibly Imagine”
Obi-Wan could not have said it better for my circumstances. After being murdered by Darth, Obi-Wan had the ability to transcend space and communicate with Luke Skywalker, helping him find Yoda, assisting in his Jedi training, and eventually allowing Luke to take down Darth and save the galaxy. After letting my buddy take advantage of and depleting me of my hard-earned wealth, I harnessed the lessons from this experience to become financially literate and went on a rampage of consuming everything The White Coat Investor had to offer.
Starting in January 2019, I read Dr. Jim Dahle's book A Doctor's Guide to Personal Finance, took the Fire Your Financial Advisor course, read through most sections in the WCI recommended books, binged all the WCI podcasts, and created a written financial plan that will allow my family to reach our financial goals. And, as you can tell, I am now financially qualified to write this blog post that you’re reading.
It’s not like I saved the galaxy or anything, but it sure feels good!
“Are You Guys Still Friends?”
I get this question all the time after telling my story. Yes, we are still friends. I tell people that I don’t hate the player, I hate the game. Just like the Dark Side of the Force is to blame for Anakin becoming Darth Vader, it was Northwestern Mutual’s influence that taught my endearing buddy to sell inappropriate financial products under the guise of being optimal “investments.”
Donovan Sanchez, in a previous blog post, mentions he and other Northwestern Mutual advisors sold products because “people will do what it takes to feed their families and provide a great life for themselves and those that they love.” Anakin Skywalker himself had nightmarish future glimpses of his wife dying, which Palpatine utilized as a strong bridge for Anakin to cross over to the Dark Side in the hopes of preventing her death.
Just like Luke Skywalker said of his father, “There is still good in him,” my buddy still works for Northwestern Mutual. But I am hoping one day he will be like Darth Vader in Return of the Jedi and turn to the good side, just like Donovan did. In the meantime, there are other financial salespeople like my buddy, and even though I respect Bill Bernstein’s financial prowess more than my own, I think modifying his quote would serve better to protect the financially uninitiated from making my mistake:
“If you act on the assumption that every broker, insurance salesman, and financial advisor you encounter is Anakin Skywalker, you will do just fine.”
If I had done this, my family and I would have been fine, too.
What do you think? Would framing potential “advisors” as a future Darth Vader have kept you from being taken advantage of? Would it have broken down the façade of affinity bias to help reveal the true intentions of the financial company they work for? Comment below!
I enjoyed your post. At the beginning of my attending career I had a close family member (with a log career in the financial services industry) recommend a whole life policy that was $6000 per month, or essentially the entirety of the income we had available to save and invest. I said no, especially after learning that the commission alone was $15k per year (which needs to be counted as a loss off the top before the money is even “invested”), and because of the education I had acquired by reading WCI. We would have certainly lost a ton of money when several years later I made a job change with an 18 month drop income that would not have supported the whole life policy contributions. It’s hard to say “No” to someone whom has earned your trust over years of shared experiences. My decision ultimately cost me a transient blip of angst and decreased trust in our relationship but those negative consequences would have been much longer lived, or perhaps permanent, had I lost tens of thousands of dollars. Since that time I have had a firm policy against doing business with family and friends. I’m glad you are on a better financial path. Thank you for sharing your story.
thanks Zach and way to go avoiding the mistakes that I made! In the end the majority of financial salesman are good people but the financial industry really brings them over to the darkside.
I know Jim is trying to scale his business, and that means Jim needs to find folks to write articles so that he doesn’t have to, but it’s definitely a decrease in quality.
All the best to Jim, but this article is just…..not up to snuff.
Thanks for the feedback, although I definitely prefer negative feedback by email instead of public comment.
By the way, you know I’m still writing and publishing as much as I ever have, right? We’re just providing ADDITIONAL content from others hopefully such that if I were run over by a bus tomorrow, WCI wouldn’t disappear. Scaling is great, but that’s not the primary purpose of having other voices on the blog.
thanks Jim and props to you for being such a prolific and highly intelligent yet succinct teacher and writer. Learning personal finance is one thing, but writing it down for the masses to actually enjoy and read is totally another. this stuff is tough!
I disagree. I think it’s well done – light, easy to read, fun for May 4, and addressing a topic that affects a lot of docs. It is just true that, especially early career, we may depend on friends for advice and lots of people get suckered. I like the reframing from criminal to Anakin.
ARH thanks!
Hey Peter yeah sorry I can’t compare to the great Jim Dahle! But hopefully there is something to glean from my story and attach a fun yet emotional context to the usual adage of not trusting financial advisors, and how things like affinity bias are utilized by the insurance companies in their sales.
This article seems like a complete “passing the buck” post. I have acquired life insurance personally and opened investment accounts and the items you mention (commissions, investment costs, etc…) were all provided in writing and available for review prior to being opened or engaging in anything. It also provided me with the information needed to determine that some of what was being presented made sense, and some of it was only good for the agent.
It also seems like the person you were working with was “qualified” by you only by you knowing that individual. In your profession, I would think that would be similar to you taking medical advice from a friend only because the only thing they got in trouble for in their life was passing notes in school. Obvisously, this does not qualify the individual to give medical advice. Basic steps like asking about fiduciary responsibility would have provided you recourse in the event that something was misrepresented or fraudulent. It does not seem like that is what happened here. To try and blame this on someone else shows a complete lack of responsibility… which is what put you in this position to begin with.
I will now go and stomp up my stairs in frustration as well 🙂
I think you missed the point here. Physicians are completely uneducated in regards to finance or investing, unless they seek it out personally (thank you Jim for this website). Your comparison of Dr. Racela’s financial advisor to that of Joe Schmoe with random advice is wildly inaccurate. The better comparison would be a person seeking medical advice from a doctor in a country without fiduciary medical standards. In medicine, we are held by default to the standard of putting the patient first, where financial incentives or disincentives take the back seat. The “advisor” industry holds no such standard, and it’s a blemish on that industry that this is the case. You have the good fortune to be able to trust physicians implicitly because we hold that standard, and we naively trust that other “professions” do the same. If Dr. Racela has fault, it only extends just this far. Further, stating an untrained outsider should have read every jot and tittle of legal and financial jargon and understanding it fully is like expecting a patient to fully comprehend all the medical implications of a thoracotomy. If I handed you Harrison’s Textbook of Medicine and asked you after even weeks of study if you understood everything therein, you’d be a liar to give assent. Interdependence amongst individuals is predicated upon good faith transactions on an absolutely daily basis. To unwind every user agreement for even the apps on your phone from which you ostensibly penned this self-righteous retort would take you years Mr. Charles.
Respectfully
Hi Glenn, thanks for the comments and yes I am to blame. I would be lying to you if I said I did any real due diligence in trusting my buddy. I did not read the 40 page whole life insurance illustration, nor the 20 page variable annuity contract.
But I did take the 10min to look up the “CFP” and other designations he had, which was ChFC, CLU, CASL. The CFP back in 2012 did mention “fiduciary” and “having clients best interest.” This is how I truly qualified him, not just because he was my childhood friend. The CFP designation he garnered gave me a false sense of security to trust him fully. Just like I would only ask for medical advice from somebody with an MD or DO, I thought I could trust my buddy with the supposedly fiduciary CFP designation.
This is my least favorite author.
Riki’s wife, also a doctor, is always portrayed as a screaming irrational woman who spends frivolously. Really? How many more of his articles do we have to read about the $50,000 whole life insurance mistake? Move on!
Thanks for the feedback (although we do prefer negative feedback by email rather than public comment.)
I suppose that I am also somebody’s least favorite author. Depressing to think about.
Hi Bev yeah definitely not about to quit my day job as a doc to write. But definitely I write about whole life insurance because this was a painful experience and hopefully no other docs will every make my mistake. Like Rick Ferri says about why he writes the same book over and over again, I likely will keep writing about whole life insurance until the stuff becomes illegal.
and about my wife- ha! luckily you said it, not me 🙂 But really, she has only been irrational in response to the whole life insurance mistake. It was that painful.
A below-average financial advisor gave you the below-average service of the average physician these days (15-minute consultation, can only discuss one symptom, results: must be psychosomatic).
The overriding message is that financial advisors are causing your burnout. Like medicine these days, you only try to treat the symptoms without a clear diagnosis of the underlying cause.
Physicians spend their careers controlled by hospitals, government, and insurance companies. Financial advisors spend their careers in control of their own time, but they have to earn it by building their own businesses. Most can’t, and they go out of business.
If physicians are so much better than financial advisors, why have they ceded control of how they spend their time by selling out their private practices nationwide? This is the real cause of their burnout. In fact, a combination of a lack of business expertise and hubris is preventing physicians from correctly diagnosing and treating this burnout.
The solutions aren’t simple, but they start with an understanding of the politics of information…the antithesis of “evidence-based medicine.” Most of the diagnoses-of-exclusion and treatment given today are handed down to physicians from pharmaceutical companies, insurance companies, and medical associations paid off by these parties. Whether you choose to believe it or not, the real evidence has often been lobbied away before it could ever reach your medical journal (i.e. mold toxicity, Lyme disease).
To fix burnout, physicians have to remove themselves from third-party control and reimbursement over every aspect of their practice…the same “conflicts of interest” you constantly blame financial advisors for having, yet those in medicine are much more significant behind the scenes without even the awareness of its participants.
From a physicians perspective, I agree that you’re spot on about the bigger causes of burnout. As a field we’ve ceded to control to corporations and the primary responsibility lies with the older physicians that sold out.
I laughed at the line about mold toxicity, but that’s a separate issue. Medical training still counts for something.
S,
You missed the most important point about the politics of information. There’s the information you read in your medical journal that you consider to be evidence, and there’s the information that has been lobbied to prevent you from reading it in your medical journal. If you believe that chronic fatigue syndrome, fibromyalgia, and “long COVID” are actual diagnoses, best of luck to you.
Or, if you can think for yourself, have these same patients do a urine test for mycotoxins (the toxins produced by mold), and you will uncover their actual diagnosis. Imagine a virus, like COVID, compromising the immune system of a patient with underlying toxicity, who now presents with an array of seemingly disparate symptoms (dizziness, cognitive impairment, tremors, parasthesias, sound sensitivity, extreme anxiety) even though they felt no or minimal effects from COVID itself.
They don’t have “long COVID”…they have mold toxicity. The virus was the tipping point in their already compromised immune system, and now they will be suffering forever until the toxins are removed from their body. Unfortunately, they will never be diagnosed or treated, because S is laughing instead of listening.
Foil hat slipping out there. Also, CFP giving medical advice…
That’s quite a hypothesis. Not an untestable one though. Or are these toxins undetectable, like humors of the middle ages?
Jim,
They are very detectable in urine, as I could show you my test results with significant mycotoxins over the past 6 years…as well as the test verifying I no longer have mold toxicity (no mycotoxins in the urine or the rest of my body). Reach out if you’d like.
Curious how you treated your mycotoxins and which symptoms getting rid of them cured for you.
I’m happy to give you this info and more…just don’t want to turn your website into a discussion of a complex illness. If you want me to write a post with my ideas on how to fix medicine, or if you just want details on mold toxicity treatment/diagnosis, email me at [email protected].
Hey Adam, yes definitely a bad financial advisor is not the main cause of physician burnout, but it sure doesn’t help, and in my case it was the main cause. I have to say now that I am more financially literate I am not burned out, take my time when I see patients and not rushing through them to generate more RVU’s to pay $28,000 a year whole life premiums.
there are definitely conflicts of interests you face as a doc like you mentioned, but I myself and likely other docs try to remember why they went into medicine to conquer these biases. my inspiration is my older brother, has cerebral palsy and scissors when he walks, works the Hillsborough, NJ public library only because our local library was kind enough to pay him a salary despite his disability affecting the amount of books he can put back on the shelf. I don’t want patients like him and their families like me to suffer but to be helped by me.
No amount pharma associated dinners/Neurology association promotions/insurance reimbursement conflicts of interest have compromised the care I deliver my patients when I think about my bro. The unfortunate truth though, is that being screwed by a financial salesman did. I was blindsided.
I am ashamed for every patient I rushed through, dishonoring my cerebral palsy brother, just to pay $28000 whole life premiums.
Hi Bev,
That stands out to me too. Multiple articles happen to mention his wife “screaming”. It’s hard to take the rest of the article seriously.
Ha! She actually doesn’t scream a lot . . . only at me 🙂
But if had screwed you out of $50,000, you’d probably scream at me too.
Why do you keep mentioning Obi-Wan getting chopped down? Anakin got chopped up. I don’t even like Star Wars.
Uh, spoiler alert?
Not all of us have seen the movies yet
Jk
Does your financial advisor buddy hate sand?
Happy Star Wars Day. The premise may be a little strained for some of the other commenters but you do you. I’d sit down and have a glass of blue milk with you
I hate sand. It’s course, and rough, and irritating. And it gets everywhere.
I can already picture Hayden Christensen saying it from that scene.
A true fan you are
I think it was more “I don’t like sand” not “I hate sand” but close enough!
I think my financial salesman buddy actually likes sand. He might have become a good financial advisor, but now he’s bantha fodder.