Beware Your Banker -- He May Be a Broker

Isn't it misleading to have the business card read "Personal Banker" and also Registered Representative? One bank spokesperson denied the possibility, saying: "We make it clear to customers which products are FDIC-insured and which are investment products that don't carry federal insurance."

Greed Conquers Sanity

So now the "banker/broker" comes up with a money idea that offers a substantially higher return. Greed -- or necessity, or ignorance -- conquers sanity. How could the bank offer more interest without some kind of additional risk in the deal?

The answer is, it can't.

These products being sold inside the banks are actually quite different from those safe, insured money market deposit accounts or CDs. These products come with sales charges, ongoing management fees and penalties for early withdrawals. Even worse, many have the potential for loss of principal.

But the friendly "personal banker" doesn't quite explain all that. Instead, he draws a chart of how much more money you'll earn every month. And how much more you'll be earning at the end of the year, and after five years.

Do you think I made up this story to make a point? Well, I didn't. It comes directly from a co-worker whose mother, Margaret, went to one of the largest, best-known banks in town. She was looking for a certificate of deposit, but she came home with information about a Unit Investment Trust preferred securities portfolio -- a fixed portfolio of dividend-paying, preferred stocks.