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In the December 1999 issue of Financial Planning Magazine, there is an
article called "Planning in Middle America", which details a new 'financial
planning' system being delivered (perpetrated) to middle class Americans.
Here's how it works, Mr. Bert Whitehead recommends to his middle class
clients (defined as ones with little to no savings to speak of, no
financial plan, but a job of some kind and some 'equity' in their homes) to
take out home equity loans in order to 'invest' in the stock market.
He believes his system is so revolutionary, he is (spreading the gospel)
teaching fellow financial planners how to do it (structure it) for the
small training fee of $12,500 and $125 per month retainer fee. For this
fee, a planner receives a six-day training program, software, forms, a
homepage and 40 interning hours. "That's when you actually sit in on
client appointments with us, so you can experience firsthand how we work,"
Whitehead says.
The strategy of tapping home equity for debt and 'investment' purposes
stands out. Most controversial, however, is the fact that advisers are
encouraged to buy credit card machines so that clients who can't afford to
pay them by cash or check, can still pay them.
Whitehead argues that the plan is benefiting the clients since he
consolidates their debt, by paying off other credit cards with a portion of
the money borrowed via the home equity line of credit, which is also tax
deductable.
When this market tanks, I wonder how he will explain to his clients just
how it was possible that they lost their homes and the equity money they
saved for a lifetime for the thrill of gambling in the stock market.
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