This week, a business woman came to my office for a second opinion financial review.

She explained why she came to see me: she bought a permanent life insurance policy because her financial advisor told her it is a great investment. She has been paying $3000 a month for that, and so far she has put in roughly $80k. Recently, she needed some cash and called to redeem the policy. Much to her surprise, the surrender value is only $1,300. She became suspicious of everything in her portfolio and wanted me to examine it for her.

It took me only five minutes to figure out that her financial advisor is screwing her, no punt intended.

Her financial advisor is charging her 1.2% a year to manage the investment. One would expect for the amount, he would put his clients’ interest first. Yet, the portfolio consists of multiple high-kickback mutual funds. I put the first fund (VAFAX) and the last fund (ODMAX) under the microscope, i.e., Google. Here is what I found.

Front load can be thought of as a mutual fund’s kickback to the financial advisor for directing his clients’ money to the fund. This business woman has about $1mm in investable assets; by putting her assets in high-kickback funds, the financial advisor made over $55k before she left the door.

Expense ratio is the cost of managing the fund. Why is it so much higher than Vanguard’s? Because it contains an ongoing kickback to the financial advisor for his effort in keeping her sedated, while the financial industry goes on to surgically remove her wealth.

At this rate, the business woman’s financial advisor will definitely have a secure retirement, at her expense.

There is one very simply way to tell if your financial advisor is a crook: use Google. It will show you the load and expense ratio of funds your financial advisor recommended to you. If it contains any load at all or an expense ratio higher than 0.5%, you are having a fox in your hen house.

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