Hi RIP friends,
I got contacted by a financial advisor via LinkedIn out of the blue three months ago. We interacted for a while, and I’m now ready to share this experience with you: the why, the how, and the what (crappy products) they tried to sell me.
To keep things manageable I’ve split this post in three parts. In the first part (this post) I’ll show you their approach, their analysis of my finances, and their marketing tactics. In the Second part we will take a closer look at the first crappy products (Structured Notes) they wanted to sell me. In the Third and final part we will destroy the second crappy product (an Insurance based Pillar 3A-3B) they wanted to sell me.
I won’t tell the advisor’s name, her assistant’s name, their company and so on because it’s irrelevant – and I don’t intend to start a Swiss “Ufficio Antisqualo“, I’m actually tearing the Italian one down.
First contact happened in early September via LinkedIn. It wasn’t directly the advisor but her assistant. I assume they didn’t know I’m Mr. RIP. They just saw that I’m a middle aged guy with a successful career in Tech, probably some money saved, and hopefully no investing skills.
They were mostly right, except for one point. Guess which one 😀
“… it’s easy! Can I try?”
Haha please, help yourself!
“Your career sucks!”
“I mean… you’re middle aged, you have some money saved… and you’re currently ~80% invested in currency unhedged foreign bonds, right?”
Ok, you’re right, I guess 🙁
Let me rephrase it: “…and hopefully unable to detect a bad investment proposal”
“Well, now they’re wrong on two things… but I’m not sure about the second one: who told you to buy US bonds?”
Ok ok go away, let me do my show! è_é
So this guy wanted to connect with me on LinkedIn. Never heard of this person before. His LinkedIn headline said something like “FinTech”, and “financial future” so I said “why not?” Maybe he’s one of the many who discovered my “secret identity” and wanted to connect.
Let’s say hello to a RIP fan 🙂
First message from him: “Hello Rico, I hope you are well, Would you have availability for a chat this afternoon? All the best,”
What? Why? Who the hell are you? Why do you end sentences with commas? O_o
Let’s check his Turing Test skills, and let’s call him Comma for simplicity: “Hi Comma, I’m pretty busy today. Please, remind me what you want to chat with me about. Sorry but my memory is fading, and I don’t remember where we met.”
It went worse than expected: “Hi Rico, I wanted to reach out, we work with several Swiss nationals and the majority of international professionals here in Switzerland,
We are a global company that advises international professionals regarding tax-efficient savings, child’s education planning, Swiss pensions, pension buyback for expats, mortgages, elite property investment in the UK and Berlin – which ensures end-to-end services, life insurance, tax-efficient exit strategies from Switzerland, unique investment opportunities exclusive to our customers from the major institutes(UBS, Lloyds, Goldman Sachs, Credit Suisse etc),
As the largest financial consultancy group with over 80 offices around the world, we look to add value to those already being looked after as well as offering a second opinion,
We have exclusive opportunities by the major institutions and add value to our financially savvy members in the same way Warren Buffet utilises his 45 advisors. When would you have availability for a complimentary informational discussion next week to speak further, with no obligation to move forward with us,
I was going to mark it as spam and never ever allow anyone within three degrees of connection with this guy to bother me again for the rest of my life but… but I got curious.
I went to Comma’s profile and checked which company he works for. Mmh, I’ve already stumbled upon that name, I can’t remember whe… Oh yeah! Now I remember! They scammed my friend Mr Reset, whom I’ve been coaching in early 2020.
I don’t know how many asses they had to kiss, but they got allowed to promote a series of shitty products to Mr Reset’s entire office (a huge one). Like most of his colleagues, he signed a very expensive Pillar 3A life insurance policy (Generali Vision Plan, take a look at the reviews). On top of the crappy investment, this shitty intermediary company took an extra 2% recurring annual fees, and 4-5% trade fee on each monthly payment into the insurance. Mr Reset was able to terminate his policy with a huge cut on its surrender value. He lost more than 50% of his contributions, during the longest bull market of the modern era.
Rage was mounting high. I was going to first send Comma to “Fuck, Off,” then block him and his entire genealogy tree from every social media account I owned.
But I got curious…
The James Veitch in me showed up:
(Each time I watch old James Veitch trolling videos I laugh harder. Take a look at this one about house renovation, this TED on unsubscribing from unwanted marketing emails, and this one about diamonds in South Africa)
And I replied:
Why am I doing this?
Not only to troll (ok, just a bit), mostly because I want to see how a professional Financial Advisor operates. I’m honestly curious. I might want to become a Financial Advisor myself one on day, so better to check how one with “decades of experience” works. I can learn a lot from them, I guess.
Of course I was wrong…
First meeting with The Advisor
Once the videocall started, I met The Advisor. She was roughly 10 years older than I am, and she spoke in a soothing manner. She started in “autoplay” mode, introducing herself and setting the ground with initial reassuring sentences like “we want to meet our customers regularly“, “we’re totally independent“, “I don’t have to suggest you products from any specific financial institution, I can look at the entire market“, “I get paid on a brokerage-base agreement with many financial institutions. I get money from them in case you decide to follow my investments recommendations“. Cool, I appreciate the honesty, but it kind of contradicts the independence point though. It’s essentially affiliate marketing on steroids.
I interrupted her to ask: “is it going to be a recurring commission, or one off?“. She offered a vague answer in return.
Then she continued: “My goals align with yours, so it’s an incentive for me to give you good financial advice” How exactly? So far it seems to me that your incentive is to sell me the products that pays you the highest commissions. As much of it as possible.
I tried to empathize with her, playing the “banks are bad, other advisors are bad” card: “Thank you for your openness. When I speak to banks they try to hide their fees!” She laughed, and bragged about her enormous experience, hard working, successes (establish authority marketing strategy) and how her business is built with referral from other people: she’d love if I could introduce her to my network (without mentioning any reward on my side, so at least this is not a Ponzi/MLM for now). Well, you gotta earn my trust first 😉
(Spoiler: she didn’t 😀 )
Moving on, she told me what I can expect from her: a financial assessment, a look at my aspirations, and some investment proposals. She also said she’s aiming to help expats in Switzerland that don’t know how to move their first financial steps, for example in the Swiss Pension System (I wonder if she read my guide about it).
Here the smell of a shitty Pillar 3 intensified… Expats might not know how to invest in Switzerland, and they are easily preyed on by your established authority and the smell of tax saving voluntary Pension Contributions. And that’s exactly what happened in Mr Reset‘s office. Show me your Third Pillar insurance proposal, “advisor”, I’m waiting for it.
After a quick introduction on my side, she added that her company (she claimed to be the largest in the world!) has connections with many providers (UBS, Credit Suisse, Goldman Sachs, Morgan Stanley), and can offer products that are not available on the market yet, that look pretty interesting at the moment.
Wait, so you AREN’T much independent after all?
Ok, enough intro. Next, she wanted to do a financial assessment, i.e. asking the question where am I right now, financially?
Financial Assessment And Life Goals
She wanted to know my earnings, my age, my assets, my liabilities, and what I’m aiming for in life.
This is just 10 minutes after we started our conversation. She’s asking me to give my numbers to a complete stranger…
“Ahem RIP… do you have problems with that? Isn’t your Net Worth Document public? 😀 ”
Yes, sure, but it’s different! I’m not RIP in front of this advisor, I’m just myself, I’m Rico Pelli. And a random Rico Pelli shouldn’t open up after just 10 minutes to someone who cold contacted him on LinkedIn!
She was gently pushy, but I showed some reluctance.
Funnily enough, before asking me about my income and spending levels she said that “everybody should do some savings, because our governments are not going to provide pensions for us“. I trolled a bit: “wait, what about Pillar 1 and Pillar 2?“. She was waiting for it: “Haha do you think they’re going to provide for you?? Hahaha!”
I was reluctant to give her information.
She played some basic NLP strategy like: “we can move slow or fast, it’s up to you… if you want to move fast you should tell me what you think you’re not getting right now in terms of advices (nice strategy, everyone has open financial questions), and whether or not you are happy working with me”
I stopped her immediately on the trust side: “Well, I don’t know yet. I’m used to making data driven decisions, not emotional ones, so… I want to see what you’re going to propose to me, then I’d know if I’m happy working with you 🙂 ”
But that opened a psychological battle: “Hey bro, you gotta give me your exact numbers if you want me to help effectively (not using these exact words of course)”.
She was right though. But still it seemed wrong to me. You gotta earn my trust, bro!
I’ve been speechless for a good 5 seconds and she changed topic. Another manipulative tactic. If left alone thinking my brain would play defensive. Better to gaslight and jump on something else, waiting for my subconscious to do the work for you.
“what do you want for your retirement?”
You’re asking Mr Retire in Progress about Retirement, take the rest of the day off, it’s already 9am, I don’t know if we have enough time to explore the topic before nighttime 😀
Anyway, jokes apart, now I need to play the “normal person” card, but I want to drive the discussion toward “Early” Retirement.
“Oh, wow… I wasn’t expecting such a question!” Liar!
“Hahaha 😉 ”
“I don’t know… I’m not sure I want to work until traditional retirement age. I earn a good salary, I suppose at one point I can slow down and work less – and use my money. Some friends are investing in dividend stocks to get an extra income, and it seems a good idea. In general I want to let the money work for me. What do you think? Does it make sense?”
“A lot of good ideas… let’s find the amount of money you need when you retire at 50, 55, 60 that will produce enough income for you to live on without having to worry that you run out of money!”
I like where this is heading now!
She’s a financial planner, I assume she’s going to spreadsheet my numbers out way better than I do, and come up with more realistic numbers than my crappy FIRE Metrics.
I mean, that would have been my expectation if she were a real independent and fee-based financial advisor, someone you pay for their time, someone that will help you design and/or validate a retirement plan with no conflict of interest regarding which products you should invest in.
In this case I knew she’d only make money if I buy her proposed products. And the more I invest, the better for her. I can be as risk averse as I want, but she needs to sell me as much of her high commission products as she can. If the better strategy for me would be to hold cash under the mattress, she wouldn’t profit from it. A clear conflict of interests.
So I know I’m going to be disappointed. She’s going to play more with the emotion buttons than with the rationality ones.
Maybe I should allocate some money and go to a real fee-based financial advisor to assess their (and my own) financial planning skills.
“Hey bro, you gotta give me your exact numbers if you want me to help effectively“
After a few seconds of silence on my side she moved on: “What’s your monthly spending, Rico?”
I bombarded her with a lot of variables: “well, at the moment 6-7k per month, but at one point child care will disappear, but we might want a second child, and in old age we might need less money. Plus, we are also considering moving back to Italy, and I assume at one point, around age 65, I will receive a pension anyway. A lot of unknowns… How do we proceed?”
“Blah blah blah exactly, these are the things we are talking about blah blah blah those are reasonable unknowns blah blah life is full of uncertainty blah blah blah”
“Yeah, ok, what return should I expect from investment? Something like 5-6%?” I played a curveball to see which bullshit territory we are stepping in.
“Yeah, when we run the numbers we assume 5%. It used to be 10% but I don’t think it’s realistic anymore…”
10%? sorry, but it wasn’t realistic even before 😉
Do not worry, even a 5% SWR sounds ridiculous enough for a retirement horizon of 40+ years, in this ridiculously high valuation regime, with bonds yielding ZERO, and every asset inflated.
But it sells. Reality doesn’t sell much. Dreams sell.
I told her I’m risk averse and skeptical of high valuations, and she played the card “Ohhh, I’ve been through many market crashes, and believe me… they always come back! Look at what happened in March!” Which, ok, I partially agree with you, but it’s also becoming increasingly more disturbing to see everyone mentioning the recent flash crash of March 2020 as the ultimate example of “the market always goes up”. Everybody is selling this idea nowadays, I bet dumb money is flooding the markets.
“So… I need roughly 1.5M CHF?” Wow, so I’m almost FI in Switzerland, I didn’t know!! This is a pathetically small amount, and it doesn’t account for taxes, mandatory Pillar 1 contributions, it assumes a 5% SWR and it has no margin of safety. If she’s going to vet this I’m going to laugh.
“And you need to adjust for inflation!”
“Right, but it’s negative in Switzerland 🙂 ”
“That’s what they want you to believe! Didn’t you notice any price increase in the last few years? What about the bus ticket? What about the beer price? Sadly there is inflation in Switzerland… Hey bro, you gotta give me your exact numbers if you want me to help effectively”
After a few seconds of silence on my side she rerun the numbers “So you spend ~75k per year… when do you want to retire?”
“I don’t know, as soon as possible haha! Ok, I’m half burnt out, let’s say at age 50, in 7 years… But I guess it’s unreasonable. Maybe 55?”
It’s hard for me to wing it effectively, but I want to see her number skills in a realistic scenario.
“if you want to earn 75k per year using a 5% interest assumption… you need 1.5M but we need to adjust it for inflation, which is 3% per year. If you want to start at age 55, in 12 years, you need… (several seconds later) 2.15M”
“We aren’t considering the pension that will be coming in another 10 years at all, are we? If we plan for 75k per year then it would be an overkill after 10 years, right?” Plus you’re not adjusting for inflation my future withdrawals, I mean… if we keep experiencing a 3% real inflation, my 75k of year 2032 will be worth 44k in 2050! 75k / (1.03^18) = 44k… but I didn’t raise this concern. It seemed to me that her forecasting skills were pretty poor. In the end, she’s just a salesperson.
“I wouldn’t count on it (seriously? WTF?). Btw, you said you have some money sitting on a bank account earning nothing… and I assume you have a good salary and some surplus each month… Hey bro, you gotta give me your exact numbers if you want me to help effectively”
Ok, let’s do it. Let’s open up. Let’s create a believable situation: “Ok, I have ~500k in the bank. Current salary is 200k gross. Let’s say 12-13k Net per month. And I save 50% of my salary. I’m good at saving, not very good at investing 🙂 ” I didn’t mention Pillar 2 contributions, she doesn’t appear to believe in the existence of pensions.
The Trust Pitch
“What about Pillar 3A? Policy or Cash?”
“I think I have ~65k with PostFinance, part of it invested in their Pension funds (Pension75) and the rest in a saving account. My wife also has another 25k more or less” We have no fucking insurance/policy third pillar, come on, show it to me! Propose that shitty product that drained my friend Mr Reset! I’m waiting here.
“If we want to move forward, as a professional I need to sit down with you and look at the numbers properly. It’s up to you. You gotta trust me. For example, there are different methods of investing your Pillar 3A” Yes, come on, show me your cards!
“Can you tell me – or better, send me some documents – about these “methods” so that I can take a look?”
“Yeah, sure, but first we need to go thru the professional investigation of your numbers… There’s no cost for you, we take a look at the Pillar 3A policy, we look at how much you got sitting in your bank account earning nothing. But there will be no obligation on you, Rico. I only want to work with people who want to work with me. If we don’t want to move further it’s ok. If we do, we need to build an element of trust. I’d be happy to go to the next stage with you, look at the finance, look at where you are, have a look at a Pillar 3A policy and see if it works better for you…“
I don’t have any canned response for this line of emotional dialogue, but I’m pissed off. Not only because she’s dropping a “Pillar 3A policy” every two sentences, mostly because I’ve already dropped 95% of my (pretended) situation and got nothing in return. I told her I’ve got 500k in the bank, 90k Pillar 3A combined with my wife, 200k salary, a 50% saving rate. I demand to see some of her products before letting her put another foot in the door.
I’m kind of speechless, and regretting having started this.
“And to get some quotes for you, I need to get things like your date of birth, your address, you know, basic stuff. You gotta trust me”
“Why the address? I feel a bit uncomfortable. I don’t know. I’m a bit reluctant.”
“It’s really up to you. If you want to move forward, I need it. You gotta trust me”
I was close to call it done, and tell her I was not willing to move forward. Nothing useful was coming out of that discussion.
Let’s accept the wasted time and move on.
Show Me Your Cards
No, let’s play one last card, just one more desperate strategy to get my hands on some factsheets: “Can I just taste some type of products? I’ve already given away a lot of my numbers and I have no idea where this is heading to. Before making the decision to “move forward” or not, I would like to know what’s waiting for me on the other end. Is there really nothing you can share with me? Try to put yourself in my shoes…”
I’m uncomfortable but that’s how negotiation works. And I’m playing against a “master of sales”, not an easy battle.
“What are you uncomfortable with? Is it just your address?”
I know this tactic, it’s a classic one in the Hunbook, used to convince people to join MLMs and other scams. I don’t have an effective response, but I’m aware of the tactic at least.
“Not only that, I mean… I don’t know what comes next. You asked for my numbers, and after some reluctance I opened up. Now they’re no more enough. Who knows what comes next. You say we need to build trust, but in my opinion trust should be earned. So far I’ve got nothing back. Show me a product you would offer to someone in my situation. I don’t think knowing the address or the cellphone or the exact amount of money in the bank would change anything. Because I assume I’m not going to send you my official bank statements anyway, right? And if you’re collecting my data I assume I’ll be asked to sign some agreement, and probably a risk assessment questionnaire… Can I at least take a look at what data you’re collecting from me?”
Good. Having volunteered in various privacy teams for more than 3 years at Hooli helped.
Silence. Her face tense. She’s thinking.
I regret having played the James Veitch card since I’m not as prepared as she is. I try to cope with creativity and some good cognitive abilities, but it’s an uncomfortable situation.
She opened up: “Ok, this is the brochure I’m filling with your information (she showed it to me on the camera), and if you were here sitting with me I’d ask you to sign it at the end of the session”
“Awesome, cool, can you scan it and send it to me?”
“Sure, I’ll scan it and sending to you right after our call”
We conquered some territory… but I still want to take a look at their products. That’s what I’m here for.
She seemed nervous. Not very happy to talk about products, without having me committed more time and effort. More sunk costs on my side would make it hard for me to say no in future. A classic sales tactic.
But she probably perceived she needed to play that card, else she’d be losing me.
“Ok, there are things we can look into without that information. I can tell you in a “broad sense” what we can offer. For example, what comes in my mind is Structured Products. To be honest I’ve put Structured Notes in my own pension 😉 They’re generally 4-6 years products, with quarterly coupons that usually compound to above 10% per year, with some protection on the downside… we can talk in detail about these types of product if you want”
“Awesome, this is exactly how I expect our collaboration to move on. I want to know the math behind these products, i.e. the expected returns, the formulas, the risks. I’m not familiar with these Structured notes, and I’m generally skeptical (especially about an investment that promises a 10% return). Can I take a look at prospects, factsheets, KIIDs?”
Silence, again. Uncomfortable.
Maybe I pushed too much on the pedal.
Maybe I looked too enthusiastic, and that means I’m either bluffing (which I am, but she doesn’t know it), or I appear to be too smart to get fooled by a crappy product even with fancy promises because I can reconstruct its risk/reward profile from First Principles (which I can, and she probably knows it).
“I will send you a couple of factsheets for Structured Notes and you can take a look at them. Of course they’re just examples, not the one I’m actually proposing to you. For that we need to get a quote, which means complete the brochure and, you know, you gotta trust me”
“Great! Thanks, send me the documents, I’m looking forward to reading them!”
Yes, I got something! At least on paper: she might decide to never send me any doc after our call ended.
Let me now test her reaction on a supposedly horrific (for her) topic: “I never heard about Structured Notes though. Some friends and some colleagues are investing in… how are they called… ETFs? What do you think about them?”
“ETFs? Exchange Traded Funds. They’re low cost, relatively simple products… They’re fine. You need to have a diversified portfolio. You need to have some low risk stuff like ETFs, probably not very exciting. I’d put some of those low risk instruments in my Pillar 3A policy for example, and then I’d put some money into Structured Notes which are a bit riskier, but they have a protection barrier that I like very much!”
So this lady whom I told that I’m risk averse (I keep all my money in cash) wants me to consider ETFs the “conservative / low risk” portion of my investments? Which ETF btw? ETF is just a tool, we didn’t mention index funds at all. There are triple inverse leveraged small caps ETFs which are anything but “low risk, probably not very exciting”. And she keeps pushing me the two products (Structured Notes and a Pillar 3A policy) she’s paid to sell.
Was I expecting anything different?
Will I hear back from this lady ever again?
“Anyway, take a look at the factsheet for the Structured Notes, but I warn you… they’re complicated. It would be better for us to sit together and go through them. When are you available to sit together and let me walk you through the products?”
It seems I will hear from her again 🙂
We scheduled another meeting in a week, but I postponed it a couple of times because she forgot to send me the docs we agreed on.
After three weeks I thought she was going to give up, but then she finally sent the Structured Notes factsheets, and Comma asked me if I was ok meeting the day after. Like they didn’t want me to take a deep look at the docs, or go around and ask opinions.
I declined the meeting on the day after, and offered availability starting 7 days after I received the doc. We met almost a month after our first meeting, to discuss the Structured Notes.
But that’s for the next episode: what are Structured Notes and why you shouldn’t own them.