Financial Products Aren’t Bad, They’re Just Sold That Way

Oftentimes when meeting with clients and prospects, we caution them about putting too much credence into the rantings of the popular financial press. We remind them that these writers and pundits are in the business of selling magazines, newspapers, books or investment courses (or some combination thereof). Due to limited space, and in order to stand out from the crowd, they must take very strong stances, pronouncing some financial products “good” and others “bad”.

It has been our experience that, save for outright illegal products, it is ridiculous to attach a “good” or “bad” moniker to a particular financial product. Any tool, financial or otherwise, is “good” for some situations and “bad” for others. Very rarely is a particular tool flat out good or bad in all circumstances. Would you say that a screwdriver is a “bad” tool because it doesn’t cut wood? No, of course not. What you might say, however is that the screwdriver is a bad choice for cutting wood but a good one for it’s designated purpose of turning screws.

All financial products are, like that screwdriver, merely tools to help you achieve your financial goals. Most financial products available are good for some situations and bad for others. Problems arise not from the design of the tool, but when it is sold for an inappropriate purpose by either an unscrupulous or poorly trained financial advisor.

Let’s use a product that we see getting bad press all the time – annuities. Various columnists we’ve seen (who shall remain nameless), when asked about annuities will say simply that they are “bad”. They’ll argue that annuities are illiquid, expensive, pay huge brokerage commissions and that you absolutely don’t need one. What these columnists fail to tell you is that annuities are a great tool when used for their primary purpose – providing a stream of income that you cannot outlive. When annuitized, they work much like traditional pension plans, providing a steady stream of income that will last a lifetime. For a segment of the population this guarantee provides the priceless benefit of peace of mind. Is your money illiquid? Generally speaking yes, for a finite period of time. Does the guarantee of not outliving your money come with a cost? You bet. We all know there’s no such thing as a free lunch. Did your broker get a commission? More than likely, yes. The fact that the broker receives a commission doesn’t make it a bad product; it just makes it imperative that you understand the potential conflicts of interest the broker may have had in selling it to you. Do you not need an annuity? We don’t have a clue. Until we’ve met with you for a full review of your entire financial picture, we can’t tell where an annuity fits in the mix. Nobody can. In fact, we recommend you run far and run fast from any advisor that makes a recommendation without asking a LOT of questions first.

Hopefully we’ve learned two important lessons here: 1) Remember that newspapers, magazines, radio and TV shows are in the business of selling more of their product, so take what they say with a grain of salt, and 2) Be very wary of anybody that tells you that a product is “good” or “bad” without understanding your unique financial situation. To paraphrase a line from the movie “Who Framed Roger Rabbit?”, “Good products aren’t bad, they’re just sold that way.”

Combining Financial Products For Starting a Business

If your business is not able to obtain financing on itself, you can resort to personal financing. Though personal financing doesn’t always provide the amounts needed for such projects, you can combine different loan products and other financial products like credit cards and store cards in order to obtain all the financing you need to get started.

Unsecured Loans And Credit Cards

By combining unsecured loans and credit cards you can raise enough money in order to finance your business when you can’t apply for a secured form of financing due to lack of collateral. This combination can aid you get funds for common expenses that you can pay with the money obtained from the loan and you can purchase particular goods and equipment with credit card taking advantage of those special promotions that most stores have. This includes of course, store credit cards that are particularly useful for this purpose.

The only problem with this combination is the fact that both unsecured loans and credit cards are expensive forms of financing and thus, it is always preferable to resort to cheaper sources of funds. However, sometimes it is possible to take advantage of special promotions like 0% APR promotional periods or subsidized rates for particular purchases, etc.

Secured Line Of Credit And Unsecured Loans Or Credit Cards

A Home Equity Line of Credit is an excellent tool for financing your business everyday expenses and cash flow. A home equity line of credit is a revolving source of funds with a credit limit that is guaranteed with the equity on a property. Up to the amount determined in the line of credit contract, you can withdraw as much money as you need and repay it the way you want with minimum payments consistent usually only of interests.

Home equity lines of credit provide a lot of flexibility in terms of financing for your business and they constitute a cheap source of funds. However, you should use them for everyday expenses or unexpected expenses as those situations are the ones where you will take more advantage of these financial tools.

For financing the purchase of particular equipment like computers, printers, scanners, etc. you can resort to unsecured loans or unsecured credit cards that can provide you with an additional and alternative source of funds. Credit cards can provide you with special offers at stores and unsecured personal loans can be obtained in the very store you purchase the item so the store will finance your purchase. This will liberate your home equity line of credit from financing expensive equipment and will leave more credit available for unexpected expenses and everyday cash flow difficulties.

The Importance of Consumer Reports When Shopping for Financial Products

Shopping for financial products is a task that practically no person the world over would ever argue to be anything other than a tedious chore at best and a living nightmare at worst. The problem with financial products is that in an ideal world, none of us would have to invest in them in the first place. As such, the very notion of searching and applying for various products with fees, charges and interest rates is something to rue from the very word go. Trouble is we’d be lost without our personal loans, credit cards, overdraft, mortgages and countless other everyday essentials, making it necessary to just bite the bullet and get on with it.

However, while it may be impossible to make the process anything close to a pleasure, it is in fact possible to take much of the sting out of its tail in terms of risks.

A Blessing and a Curse

The internet has proved to be both a blessing and a curse when it comes to seeking financial products of safety and value, with millions of critics now perched on entirely different sides of the fence. With each and every passing year, thousands of new providers and lenders make their way on to the web and offer their own take on products, packages and services ‘guaranteed’ to make our lives easier. True, most may be entirely intent on living up to their promises and offering something of value, but the sheer abundance of names and brands makes in inevitable that the odd bad-apple will slip through the net here and there. The larger the web gets, the more bad-apples to avoid, which mean that in essence we are living in riskier times than ever before when it comes to the possibility of getting well and truly fleeced.

However, the web also provides each and every one of us with all the tools and resources we could ever need to make informed and educated decisions the likes of which have never been possible. There would of course be no better way of ensuring a smooth and safe agreement/transaction than by looking into future to know what to expect, though by looking into the past we can benefit from the next best thing.

Comparison Sites

Today’s internet is simply littered with independent comparison sites and helpful consumer resources the likes of which have revolutionized the way we can approach personal finance. No matter what it is that you might be looking for, it is 100% guaranteed that the product, service and provider behind it has been put through its paces by hundreds, thousands or maybe even tens of thousands of fellow consumers.

A single word from the consumer is worth more than a million or more from the provider, therefore meaning that any and every consumer looking for a safe and attractive deal should make these resources their first ports of call. All the promises and guarantees in the world are worth less than the paper they are printed on if they are not kept – these are the places to find out who practices as they preach.

It has never been easier to access hundreds of thousands of consumer reports on any and every financial products imaginable and will never cost you a penny to do so.