RIP-OFF ALERT: There’s a warning I want to put out about investments and insurance being sold at banks. People buy these things thinking that they’re somehow “safe” because they are sold at banks. They are not, and I have a stark story that illustrates that point.
There was a Boston-area man who had saved money his whole life in CDs. Upon retirement, he went to a Bank of America (BOA) branch to see what he could do about low CD interest rates. He was told by his banker to go speak to a man located right there in the branch, across the lobby. That man turned out to be a stockbroker in BOA’s employ.
The BOA broker told the retiree he’d put his money in investments that were supposedly “safe” and could earn him a higher rate of return than CDs. Well, the investments weren’t safe and certainly weren’t FDIC protected, so the man lost most of his life savings. Despondent, the retiree chose to take his own life.
Now, it gets worse. The man’s grieving widow wanted to sue BOA, but the suit was thrown out because the retiree signed a contract that stated any disputes must be resolved not by litigation, but by kangaroo court arbitration. (Such mandatory arbitration is a stacked deck against the consumer. That’s why it’s common in the financial world and across corporate America.)
Longtime listeners know I despise BOA and all the giant monster mega-banks. They brought our nation to its financial knees and caused millions to be unemployed with their reckless behavior that preceded our country’s financial meltdown. And there’s good reason to believe if that behavior goes unchecked, as it largely has, that could set us up for a future financial disaster.
But this is not another one of my attacks on BOA.
This is a warning that the friendly person in the branch who you’re directed to when you complain that you want to earn more on your money may be selling insurance or investments. You should never buy insurance or investments in a bank, though they’d love if you do just that. When you buy investments at a bank, you pay monster commissions and they tend to push you into their own products. It’s a disaster for you.
It’s also a terrible tragedy that the retiree took own life. Now, there could have been other things going on in his life, I don’t know the family. But I just tell you this stark story so you keep in mind that banks should be about simple banking. Avoid those friendly faces who want to push you above and beyond using a bank for anything other than simple savings, checking, CDs and loans. Run the other way if you get that pitch. It might just save your life.