Picture Credit: m.robersonart || “When You Come to a Fork in the Road, Take It” attributed to Yogi Berra
Limit the timing of a person’s choice, and the person will think about choosing.
In 1992, I went to work in the Pension Division of Provident Mutual. It was a time of change as more and more pensions were being structured as defined contribution [DC] plans. Old products structured for defined benefit [DB] plans were being replaced at a slow rate. Immediate Participation Guarantee products were giving way to Guaranteed Investment Contracts, which would quickly give way to Synthetic Guaranteed Investment Contracts.
And for variable accounts, insurers were trotting out separate account products to try to challenge mutual fund companies as they competed for the business 401(k)s and other DC plans. Now old methods die hard. Many of the group annuities marketed to DC plans still had DB style features, which limited the number of times NAVs were calculated, and/or trading from one fund to another, which could only happen when NAVs were calculated.
As time went on NAVs were calculated with greater frequency, moving from annual, to quarterly, to monthly, to daily. Trading ability moved in lockstep, though some firms limited the total number of trades in a year that any participant could make.
And then a strange thing happened. When it was annual many people traded on the day it could be done. Moving to quarterly and monthly, not only did the percentage of people trading drop, the absolute amount dropped as well. Moving to daily, it was almost like people stopped trading. Because they could do it at any time, they stopped worrying about it and did not trade much until a panic hit. (Aside: when it moved to daily, a small group of people did trade frequently, but the grand majority would do nothing, or maybe do one rebalancing trade per year if they were disciplined.
Now, this applies in a number of other areas. Often companies want people to forget that they are paying them for service. This applies to many financial products where fees are paid on a daily basis. It’s tiny on any given day, but adds up over time. If a financial advisor offers direct billing, it is definitely more noticeable when you pay it quarterly.
Other companies want you to pay them on an auto-renewing basis. They may even offer a discount for doing it. I don’t like auto-renew, and so if I do it, I put a tickler note on my calendar to consider non-renewal one month before renewal.
Other companies want you to pay automatically from your credit card or bank account. They don’t want you to think about the money you are sending them. Even though it is a minor hassle to write checks for things, paying for them personally makes you think about the product or service, and whether you think you are getting value for your money.
Service contracts for HVAC equipment can be like that as well. Any sufficiently complex service has some stickiness to it, and you have to plan in advance to replace it. Notes in the tickler file help to get you ready for the renewal dates. This year, for the first time in 10 years, I bid out my E&O coverage. And as I have said before:
“For those that are short on time, my basic advice is this: bid out your auto, home, umbrella and other personal lines property & casualty insurance policies once every three years, or after every significant event that changes your premium significantly.”
Bid Out Your Personal Insurance Policies!
The insurance companies count on the fact that you are asleep to raise your rates at renewal. And, for those that buy deferred annuity products (don’t do it), I can tell you that agents keep their own tickler file of the date that the surrender charge goes to zero. Then they call the policyholder up, saying they have a much better policy for them. I can tell you that the single most important factor in annuity surrender is the end of the surrender charge period. In the two years following it going to zero, 30-40% will surrender, and go to a new annuity, where they are locked in for another surrender charge period. The only winner is the agent. Both the policyholder and company would be better off if they didn’t surrender.
But life insurance products are sold, not bought, for the most part. The policyholder is probably better off saving something, rather than not saving.
My simple advice to you is take a look at your finances, and think about the places where you money is leaving you quietly. Then make a plan to evaluate every every product and service that is auto-paid, and ask whether you can do better — lower cost, better quality, or even “I don’t need that anymore.” Sometimes you might even find fraud. If you aren’t thinking, and defending your finances, product and service providers will find ways to quietly take advantage of you. Don’t be an easy target.
All David’s “rules” were developed during a time when the rule of law prevailed. The FBI wasn’t fabricating evidence, withholding exculpatory evidence, and multiple agents perjuring themselves to the FISA courts. In the previous era, the FBI director would go to jail for any of these crimes; today, Comey got a book deal.
Supposedly rigging elections is illegal. Supposedly taking bribes from foreign countries (Hunter took bribes from Ukraine, China and Russia that we know of, and Joe Biden personally bragged about the Ukraine shakedown).
Since the rule of law is now selectively applied, David’s suggestions are naive and based in a foregone era.
According to media outlets, Hilary had a 90% chance of winning. The same experts said 90% chance of a “blue wave” this time. Now the same experts are saying the Pfizer vaccine (that was rushed) is 90% effective?
Fool us once, fool us twice… at some point even the dumbest workers in society are going to wonder if the media knows any other numbers. The soviets had much higher quality propaganda, and no one believed them either.
I know the welfare class will agree with whatever rubbish the welfare office tells them to believe… provided they don’t have to get off the sofa or stop smoking their marijuana and provided the welfare checks are still accepted by actual workers who are fed up.
Harris supposedly “won” (the dementia puppet will do as he is told or else Hunter goes to jail!). Supposedly she wants a “green new deal”… ergo all the oil and refinery stocks skyrocketed today. It’s like the wealthy are doing a pump and dump before capital gains taxes go up.
The Harris regime hasn’t been certified winning the election except by the media, and already we are seeing the economic system coming apart. Millions of small businesses have been in lockdown for 8 long months (not the two weeks fauci claimed).
Most carefully developed vaccines are about 60% effective. Cue the boiler room brokers promising this time will be different
I’m sure David has the best of intentions with publishing his “rules”, and I thank him for trying. However it comes across very naive.
David learned those guidelines back before the USA became a kleptocracy. The rules under the new Marxist oppressors will be very different.
Perhaps David could interview old timers in Baltimore who watched their once vibrant city get overrun by corruption, crime, violence and urban blight. It seems that would be a lot more relevant to today.
If you think I am naive, please stop reading my blog and commenting here.
Now that Democrat apparitnik Jamie Dimon has sabotaged the USA economy so he can “get Trump” (to heck with all small businesses, just get Trump)— JPM published a “report” (press release) admitting lock downs are pointless. They reached this conclusion after the election because… because Dimon is a DNC swamp thing, not materially different from an RNC swamp thing, but JPM reports must serve the DNC so Dimon can get appointed treasury secretary and dump — I mean sell— his JPM shares tax free.
There has always been some corruption in the political class, but they aren’t even trying to pretend to be legit anymore.
Meanwhile the CEO of Pfizer dumped 60% of his company stock on Monday, hours after announcing a vaccine that is supposedly 90% effective according to media pundits who failed biology and majored in communication. The CEO has better info than any Wall Street fiction writer … and his actions speak louder than the tv pundits words
Please stop propagating false claims of election rigging. Trump campaign is 0 for 12 in court. And Hunter was not on any ballot.