Best known for home and auto insurance, now State Farm wants to sell you investment products under the guise of a better, safer retirement.
Should you buy investment products from the agent that sells you car insurance?
The answer: of course not. Here are five reasons why.
1. What Synergy?
What do investment and Property and Casualty (P&C) insurance products have in common? Absolutely nothing. They are totally separate products and require very different types of expertise to help you make the right decisions.
2. Leveraging Relationships
State Farm wanted a way to generate more revenue from its relationships with 18,000 agents and millions of subscribers. So what if the agents were not qualified to provide investment advice? Their clients already trusted them to provide competent P&C advice. Investment products are one more way to generate more revenue from existing relationships.
3. Leveraging Trust
You may have a long-term relationship with a State Farm agent. The duration of the relationship means you probably like the agent. What you may not know is people inherently trust people they like. State Farm is counting on trust. Once trust is established agents can sell you the products that make them the most money.
4. One More Product
How much do agents have to know to sell mutual funds? The answer is not much. It is one more product they can sell to people they know. Unfortunately, this product impacts when you retire, your standard of living during retirement, and your financial security late in life.
This is not just one more product sale. It is the most important financial decision you will make for your financial future.
5. You Have Choices
There are hundreds of thousand of advisors and firms in the U.S. that specialize in providing financial advice and services to individuals and families. You have a lot of choices. Why buy investment products from a P&C insurance agent when you can buy from a professional who has spent years acquiring specialized knowledge that helps people achieve their financial goals.
What’s the Catch?
There is a catch that creates a major source of hidden risk. You already know the State Farm agent, but you do not know any financial experts. State Farm is counting on you to select one of its agents based on an existing relationship that may include friendship and trust.
It is always easier to select someone you know. That does not mean it’s the right decision. Existing relationships are not a substitute for advisor competence and trustworthiness.
It is definitely more difficult to select experts you do not know. You have to find them and research their credentials, ethics, and business practices. Check out Paladin Registry, an online source for finding vetted, 5 Star rated financial advisors and firms. You can save a lot of time and you will make a better selection decision.
Jack Waymire is a member of the DailyWorth Connect program. Read more about the program here.