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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).

med school scholarship sponsor

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:

From FinStupid to FinSmart

 

“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.

Anakin Skywalker Star Wars

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!