Free Lunches
It feels like there’s been a lot of interesting fraud in the news lately. From low-level cyberpunk hijinks (e.g., an NFT artist stealing IP) to the more traditional, sophisticated variety (e.g., an international conglomerate manipulating its stock price), or a mix of the two (e.g., meme stocks issuing weird junk equity). And, of course, good old-fashioned tax fraud (e.g., ”donating” a yacht to charity). Like podcasts and beer, there’s a different flavor to satisfy everyone’s taste.
But for me, the most grating and pernicious fraud that’s gotten attention lately, at least in my corner of the internet, comes from the world of life insurance. Specifically, the social media hucksters preaching the gospel of IULs, evangelizing leverage as the One True Savior in a contemptible world of retirement accounts and steady capital appreciation. There is one guy in particular that grinds my gears. He shall remain nameless (since he feeds off negative attention), but imagine your dad’s caddy channeling Tony Robbins in over-produced videos, spouting more bullish*t than Cathie Wood and Robert Kiyosaki combined. He is as spurious as he is smug, and (apparently) makes millions by lying to unsuspecting consumers.
Anybody who’s so much as read a Berkshire letter recognizes that these schemes are Ponzi-esque. Even the insurance industry has acknowledged that something doesn’t smell right. There is so much nonsense to debunk I don’t even know where to begin, but I think these two axioms should suffice: 1) there ain’t no such thing as a free lunch, and 2) if it sounds too good to be true, itprobablydefinitely is. TL;DR: Stay away.
Yes, these charlatans deserve to be harangued, but there’s plenty of blame to go around. The insurance companies creating the products, the regulators asleep at the wheel, and the close-mouthed financial professionals are all complicit. And don’t forget about the poor, innocent buyer; they are guilty as well.
The land of finance is a dangerous place. Fraudsters are lurking everywhere, waiting to pounce. Your only protection is past experience, education, or a good advisor. Just remember that you shouldn’t buy anything from a dude in a golf shirt, except a margarita. Good luck out there.
Devin Faddoul, CFP® is the founder of Adda Financial | Outsource your financial life. Focus on your real life.