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It's Guaranteed!

March 31, 2009 By Leave a Comment

Mark Cuban may not be someone you would want to emulate but he had an unusual posting on his blog the other day that should be mandatory reading for Tim Geithner at al. It had to do with guarantees. Mark was reading the New York Times and saw an ad from Fidelity Investments that promoted “guaranteed income.” His post on blog maverick of March 9th, is worth a second look. Mark was able to discern that Fidelity was offering the American public an insurance product that would guarantee that your income from that product would never run out. Coming from the bastion of integrity, fairness, and no loads this should be a layup for the American consumer, but Mark found one disturbing point that the ad didn’t want you to understand. There was a qualifier to this ad, the qualifier stated, “Guarantees are subject to the claims-paying ability of the issuing insurance company.”
Hey! This is a Fidelity ad! This isn’t Baldwin United, this is Fidelity! Certainly the claim that is made will be backed by Fidelity in times of trouble? However, this may not be the case. It seems that Fidelity might have an underlying insurance company purchase the annuity, that they might find themselves in trouble and then alas, your annuity would no longer be guaranteed. Where is Cuomo when you need him? Has Fidelity found its way down to the depths of the rest of the thundering herd of financial services companies that play shell games with client money? Not Fidelity!

But something has changed at Fidelity.

Is this the tip of the iceberg? What other things that we take for granted are not as we think them to be about Fidelity? Soon after this ad ran in the New York Times Fidelity Life Insurance Company decided to no longer offer the product to it’s clients. The impact of Mark Cuban’s blog may not have anything to do with the decision that Fidelity made with regard to this financial product, but one thing is sure, the clients that are currently in this product that have experienced significant erosion of their capital over the past 18 months are not sleeping as soundly as they may have before Fidelity pulled the plug. On a side note Mr. Geithner, there are only two guarantees in life, death and uh….well in your case maybe only one.

Filed Under: Investing Misconceptions

Fidelity wants to hold your hand…(Boston Globe March 11th, 2009)

March 10, 2009 By Leave a Comment

Fidelity wants you to know that they are in your corner. Fidelity wants you to make the right decisions for your financial future. According to the Boston Globe they will be having more than 500 free seminars across the United States for customers who need their hands held. The topics will cover things like market intelligence, actionable financial strategies, and three on-line calculators to assist in evaluating your portfolios.

I have a few quick questions Fidelity. Let’s start with, “if you are now going to tell me about market intelligence, where was yours in 2008 so I could have avoided some of this debacle?” Why didn’t some of those fabled asset managers like Peter Lynch save most Fidelity clients from losing nearly 40% from their equity funds? Why didn’t Ned come out of semi-retirement, ride the white horse of diversification, cut the fees on his funds, so that we could endure the bloodbath.  (In 2008, 40 out of Fidelity’s 45 Equity mutual funds listed on page 16 of the Fidelity Mutual Fund Guide Special 2008 Year End issue failed to beat the S & P 500. In fact, the average return for these 45 funds was -42.69%, the S & P 500 according to page 24 was down only -37.00%)

The on-line calculator may be helpful because it reminds clients that because of their losses last year they shouldn’t count on retiring for another 8 years. By the way, Fidelity will thank you for putting even more into their funds in order to be able for you to retire after an additional 8 more years of working. Thanks Fidelity, you are always looking out for us. We needed to know that we made poor decisions in 2008, and use that information to be much more market intelligent. By the way, you have also given me an actionable financial strategy! It’s that I shouldn’t place my money at a firm that will not protect me on the downside (most of the prospecti have limits on equity exposure both high and low) and we’ve learned that your funds don’t really perform to well on the upside. ( Only 5 of 45 funds beat the S & P 500 with the best performing fund being down -30.27% in 2008).

So while I appreciate the opportunity to attend one of these seminars, wouldn’t a more aggressive approach have been to save me from the market last year instead of trying to save me as a client this year? Wait, that’s right, I forgot. The young intelligensia that pepper your vast phone centers across the United States are not required to have the best interests of their clients in mind. They just need to hit their goals and sell more Fidelity answers to our now burgeoning needs. (By the way, you did still collect the fees for having my money in your mutual funds last year didn’t you? I wouldn’t want you to have to cut back on anything Ned!).

One other thing, the 2012 529 plan has lost nearly 20% of its value in the last year. Since that’s just 3 years away, would you mind picking up the tab for the final year of college for our family? See, I learned about actionable financial strategies and being market intelligent at one of your seminars.

Filed Under: Mutual Fund Foibles Tagged With: ,