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In Your 50s? Beware the Slick-Talking Seller

HUNT VALLEY, Md. ( TheStreet) -- It was 1979 and I was a rookie salesman for Investor Diversified Services, now known as Ameriprise (AMP - Get Report). The sales manager of our office in Annapolis, Md., was Jeff Jefferson (not his actual name, and you will see why). Jeff was the quintessential financial services salesman.

He wore very specific suits and drove very specific cars to make people see him as successful. He lived in the right places and knew the right people to make him seem wealthy and instill confidence in people to take his advice if they wanted to be like him. He also shook hands with people at a very specific height (at heart level) and he wore a tie clip that had the number 5,698 on it (I honestly cannot remember the exact number, but this gets to the point).

Sometimes the hard sell benefits the sales representative as much or more than the buyer -- a truism in financial services as well as other fields.

Being a rookie, I was stupid enough to ask him what the tie clip numbers meant. Jeff stared me in the eyes and said, "That, young man, is the total amount of money that 98% of American's retire with at age 65, and it's our job to help our clients not be a part of that statistic." In many ways that was a point well taken, but even at the time I thought, "Yeah ... and make you rich."

The IDS Growth Fund, if I remember correctly, had a zero-percent rate of return from 1960-79. We may have gotten clients past the $5,698 amount, but at that rate of return we were not much past it after all the commission costs. In those days, to make 8% commission on a mutual fund sale was not unusual, and the contract funds paid 50% -- yes 50% -- in the first year and then 4% for nine years, all equaling a net fee of 8% over 10 years. The selling point was that the agent got paid upfront for the 10-year total, and the big fee in the first year locked the client in to continue until payday in the 10th year. You had to assume people were financially illiterate to buy into that program, but they were a roaring success in the '50s, '60s and '70s. They suffered horribly in the '80s and, believe it or not, are still hanging on today.

So what is the point? That the financial services industry has been scaring the public for my entire 32-year career to sell stuff to them. One of the biggest scare tactics is the implication that you are going to be homeless and bankrupt in retirement. But fear not, Jeff and other "great heroes" of personal finance have the answer for this dilemma. (Yeah, right!).

Every American must be diligent in doing thorough, well-thought-out retirement planning. It is more important than ever, especially considering most of us do not have the same pensions our parents had when they retired. Nonetheless, we must not be scared into investing in some investment or insurance product sold by some slick-talking salesman.

And in case you are interested in knowing which products the "Jeff Jeffersons" are pushing today, they are equity indexed annuities and guaranteed withdraw annuities. Beware!

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Andrew Tignanelli, CFP, CPA, is president of Financial Consulate, based in Hunt Valley, Md., and a member of NAPFA, the National Association of Personal Financial Advisors.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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