Is my parents FA giving them bad advice?

[Anonymous]

Parents met with their FA after the birth of our DS. He told them we were stupid to open a Utah 529, should have opened a VA one instead. I told them we won't be VA residents for much longer and the tax credit is not as good as the returns/low fees of Utah. He told them to buy a life insurance policy on our son- for what? I feel like they could be getting duped. I don't know how he is being compensated.

[Anonymous]

Yes, he is giving them bad advice. He may get a cut on the life insurance for your son. There is no conceivable reason for grandparents to get life insurance on a grandson.

[Anonymous]

that sounds crazy. WHat sort of life insurance for your son did he recommend? Does he get a cut of that? Is he up selling?

Your parents understand that life insurance for a child is only a maybe good idea if it's cheap and you couldn't afford it if something happened if he died and funeral expenses had to be covered, right? I am assuming you (or they) could cover those costs. So what was FA's reasoning?

[Anonymous]

It's whole life - intended as an investment, but a hugely sucky one - and yes, the FA gets a big big big commission.

[Anonymous]

yes, he is a lousy advisor (or at least, biased in the way he is compensated)

have them choose a flat fee-only financial advisor instead. www.napfa.org is a good way to find one in their area. (not one that is commissioned based on the investments)

And life insurance for children (particularly whole life insurance in general) is pretty much always a bad investment, mainly because there are many penalties and it often has a low return on investment (haha "safe") that doesn't keep pace with inflation.

[Anonymous]

Anonymous wrote:It's whole life - intended as an investment, but a hugely sucky one - and yes, the FA gets a big big big commission.

THat settles it. HUGELY BAD advice, and your parents should run as far away as possible. They probably won't, but perhaps you can give them enough tools/knowledge to help guide them a little.

[Anonymous]

Anonymous wrote:It's whole life - intended as an investment, but a hugely sucky one - and yes, the FA gets a big big big commission.

The commission is paid out over the life of the policy, so it's in the FA's interest to sell a policy for a baby.