Meet Wally Street. The Reason You're Stupid.

Dedication

I dedicate my book to my good friend Wally Street. I probably would not have a job if it wasn’t for Wally and all his shenanigans.

Acknowledgement

I acknowledge that if you are currently doing business with banks, insurance companies and Wall Street firms for your financial advice, then, unfortunately, you are doing business with Wally Street. As you will soon realize by reading this book, getting your financial advice from Wally Street is a very stupid thing to do. Very stupid indeed.

Thanks to my daughter Rudi for her illustration of Wally Street.

Thanks to my wife Natalie for her help with this book and for being my wife for almost 30 years now. This picture was professionally taken by Life Touch – https://lifetouch.com.

Thanks to my son Marshall for being all knowing and all powerful and explaining to me what the heck is going on in Game of Thrones and The Walking Dead.

Thanks to my baseball buddies Gregg Rollo Rollins (far left), Jimmy Bum Scott (second from left) and Randall Rumpy Guard (far right) for knowing what it means to be a true friend. I am the third one from the left and they call me RJ. Gregg Rollo Rollins has a MSBL World Championship ring and Randall Rumpy Guard has an MSBL World Championship ring and he is also in the MSBL Hall of Fame.

So far, this is the closest me and Jimmy Scott have come to a MSBL World Championship ring. All we have been able to do is look at them and have them rubbed in our faces by Rollo and Rumpy.

Thanks to the Arkansas Diamonds, Diamond Dream Mustangs, Houston Yankees, Houston Skeeters, Jacksonville Jagwires, Memphis Mid-South Warriors, Savannah Tropics, Tri-State Bulls and Tri-State Titans teams and players.

The Savannah Tropics are shown here. You have to love those uniforms. Other players on other teams were offering us money for them.

The Mid-South Warriors team is shown here, and they are probably the best team that I ever played with over the last 30 years. I had the honor and privilege of being a part of their team in the fall of 2017 at the MSBL World Series in Phoenix, Arizona. They are managed by Antonio Tony Jones, back row (fourth person from the right) standing next to me (third from right on the back row.)

Thanks to my late father Hillman E. Johnson for his quips and jokes interspersed throughout the book. He had a lot of friends for whom he kept laughing all the time.

Thanks to the many family and friends whose names that I didn’t mention and who will probably get their feelings hurt because of it. Besides, we would be here all day if I had to list them all and nobody really gives a flip anyway.

And finally, a special thank you goes out to all my readers who will soon forgive me for calling them stupid.

Introduction

I updated this book in June of 2018. I added all the pictures and illustrations to it that I thought would be helpful. In addition, I made several changes to facts and figures based on recent tax law, plus added or expanded on a few stories here and there. When I thought I was done, I found a few more typos that I had to correct, so hopefully this version should be it.

You may be wondering why I sometimes call myself The Introverted Advisor. It’s simple really. I am an introvert.

I think I have pinpointed the reason that I am so introverted. I grew up with a father that was six-foot six inches (6’6) tall and he was very intimidating. He yelled and cussed a lot at the most mundane things. You did not want to spill a glass of milk around him, because he would let you have it. Don’t get me wrong. I loved my dad, but when you are around someone that is 6’6 tall, plus yells and cusses a lot, then you tend to become quiet and introverted. This is what happened to me.

Being introverted and being in sales is not a good combination. To make up for this glaring shortfall, I have taken the path of staying on top of things by being educated. This is self-education that I am describing. I have always loved to read and with the internet, books, magazines and other forms of education, it is easier than ever to become self-educated. Of course, you cannot do everything on your own. You need a mentor here and there and I have had several, including my dad.

It is totally ridiculous how introverted I am. Sometimes it is hard for me to reach out to people, because of my introverted nature. The thought of beating on doors, or glad handing at networking events makes me cringe. My dad used to call networking shaking hands and patting fannies. He was a funny guy and I will pass along more of his famous quips throughout the book.

I once was a member of a financial services trade organization for at least eight years. I regularly attended their meetings, but never once received a referral from an attorney, or CPA. I cannot blame it on the organization or its members. It was my own fault, because of my introverted nature. Even when I was in this group, most of the topics that were discussed and presented were rarely ever over my head. That is unless it was some topic on litigation. Then, I must admit that I do not know much in that area. Most of the time however, I already knew all about the subject being presented. That sounds egotistical I know, but, it shows the effort that I have made to stay on top of things. I am proof positive that you can be introverted and a little bit egotistical at the same time.

Perhaps, I can make up for this glaring weakness of being afraid to speak up and network with people by authoring this book. Being afraid to talk about your weaknesses is a weakness in itself. It is better to be open and honest with people rather than try and deceive them into believing that you are someone that deep down inside you are not.

This is what I am doing here in this Introduction. I am exposing one of my major weaknesses for all the world to see. I wanted you to know that I am an introvert, but very extroverted when it comes to authoring a book. As you are reading this book, you may think to yourself, Wow, Rick. You sure have strong opinions. That is certainly true. I do have strong opinions, especially when it comes to people being taken advantage of by the big Wall Street revenue generating machine.

To get my story out there, I have authored this book targeted primarily at people who need to be taken to the woodshed, or, as my dad used to say, We need to have a come to Jesus meeting. This is where you need something like a hickory switch to your rear end to get your attention, because most of you are woefully unaware of how badly you are being treated by banks, insurance companies and Wall Street firms. My aim is to fix that for you. For your sake, let’s hope that I am successful.

As you are reading this book, you must realize that I can be a little condescending at times. Well maybe, a lot more than a little. That will be my hickory switch. In addition, I may even use a few politically incorrect cuss words. Sorry, but I am not a politically correct kind of guy. Is that fair enough?

This book is voluminous for sure. However, I wrote it with the intention that you can use it as a sort of review-as-needed reference book. Like when Wally Street starts talking to you about a Variable Annuity or a Fixed Indexed Annuity. Keep in mind that with most of the subjects that I describe throughout the book, I am only scratching the surface. There is significantly more to the story.

There is something in the book for pretty much all demographics. Young and old. In addition, there are chapters targeted to both the middle class and the affluent. The over-riding theme of the book, however, is targeted to the people who get their financial advice from banks, insurance companies and Wall Street firms. Sadly, that covers pretty much the large majority of you which is about 85% of America.

Another theme of the book is the fact that I believe that you will be immensely better off using the proper professional to help you. Specifically, this means independent registered investment advisers, Estate Planning attorneys, Elder Law attorneys and CPA’s. The things that I am adamantly opposed to are you investing on your own, (you’re not qualified, even if you think you are,) using Wally Street, (the reason you’re stupid,) using an online legal document firm, (dumb with a capital D) and preparing your taxes yourself, (you cannot be serious,) especially when your financial situation demands a qualified CPA.

Also, when you come across the quotes that I have placed throughout the book at the beginning of each chapter, then I want you to take a moment to reflect on what those quotes mean. You should find them inspirational, educational and funny in some cases.

Further, at the end of each chapter, I will summarize the key points that I want you to remember. Some of these key points will make you laugh, too.

The last chapter of this book is My Personal Story. This chapter will help you to understand who I am as a person, the challenges that I have faced in my life, and finally how I have overcome those challenges. In addition, you will understand why I believe what I believe. Further, if you have been through some tough times, then perhaps you can look at me as someone who has had it worse than you. This might make you realize what I have learned from my challenges. Specifically, you can always find other people who have had a tougher time than you. Hopefully, by realizing this fact, then this will help you keep moving forward with a promising outlook on life.

One more thing. I know it is hard to believe, but I am not flawless. It is very possible that something in the book might be inaccurate, because of changes in tax law, or because simply that I didn’t do enough research. However, I have done my best to ensure that this is not the case. Again, instead of just relying on this book, I would prefer that you rely on the corresponding professional for advice whether that be an independent registered investment adviser, an Estate Planning attorney, an Elder Law attorney, or a CPA.

Thank you again for buying this book. I really appreciate it. If you purchased this as an eBook, then you will automatically get my updates as they occur. Welcome to your journey of self-discovery. If after reading this book you choose to follow my advice, then you will experience major self-improvement without a doubt. That’s a fact, Jack.

Richard Allison Johnson aka Richard Mark Allison

The Introverted Advisor

Chapter One

We are what we repeatedly do. Excellence, then, is not an act, but a habit.

~ Aristotle

Meet Wally Street

Wally Street is a made-up character that I invented to showcase the financial advice offered by financial advisors who work for banks, insurance companies and Wall Street firms. Wally Street could work for a bank, an insurance company, a Wall Street firm, or perhaps all three.

Wally Street is a man who does things by the rules of the game. You see, it is a game to Wally. He has a creed that he lives by and that creed is to generate revenue for his firm and himself. Your needs are sadly missing from his creed.

Wally must produce revenue to keep his job. His revenue target is $250,000 a year or more. This means that he must sell you products that generate lots of commissions and fees. Don’t be fooled. He does not work in your best interests.

You may scoff at what I am telling you. Your Wally Street would never treat you like a revenue source, or so you would think. He always remembers your birthday. He invites you to client appreciation events. Perhaps, he even gives you free tickets to sporting events. In your mind, he is an all-around good guy.

We had a Wally Street here locally that took everyone to the Super Bowl one year in Miami and paid for everything. He called on DEA and FBI agents no less. The guy ended up being a Ponzi schemer. Once they figured that out, they went after him. He killed himself before they could catch him. If DEA and FBI agents can be scammed by a Ponzi schemer, then so can you.

We had a female Wally Street here locally that sold high interest car loans and paid her investors a high rate of interest, minus her commission of course. Not only did she charge them a commission on their investment, she took their entire investment, too! The victims were mostly the elderly who were in investment clubs. This Ponzi schemer infiltrated their investment club and ingratiated herself with the members. These victims believed that this Wally Street was a financial guru. She was a guru all right. A Ponzi scheme guru.

Your Wally Street might be a nice person and probably is in fact a nice person. However, the business model under which he operates is the major factor in his quest to take your money. In the following chapter, I am going to describe the products that Wally Street routinely sells to his victims, or excuse me, I meant clients.

Here is my agreement with you as the reader: If you have bought any of the products described in the next chapter, then you will have to admit that you have indeed been a victim of Wally Street.

After you have discovered that you have been a victim, then you have a choice. Do you become a victim repeatedly? Or, do you make the bold step to make a change, regardless of how much your Wally Street seems to be a genuine good person? This may be very hard for you, but it would absolutely be the smartest choice.

I realize that most people like their version of Wally Street and would never even think of leaving them. As you will find out later in the Financial Plans section, it just might be possible to keep your accounts where they are and have a second opinion overseer watching over your Wally Street. We will get to that before you know it.

There is something inherently wrong with the business models of banks, insurance companies and Wall Street firms. As long their focus is to generate revenue, then you would be a fool to do business with them. Of course, I do not expect you to believe me at this point, because you have no reason to believe me right now. However, by the time I get through with you, then you will be agreeing wholeheartedly with me, if you have any sense at all. If not, then you get what you deserve. That is a harsh statement I know, but you need to hear it. The fact that your version of Wally Street is a nice person has nothing to do with the business model under which he operates. It is the business model that is the root of the problem. You must understand this critical point.

You have heard it said, The definition of insanity is doing the same thing repeatedly and expecting a different result. If you keep doing business with your version of Wally Street, then you will continue to get taken advantage of by his company’s business model. There is not any doubt whatsoever of this fact.

Hold on to your seats boys and girls. You are about to embark on a journey of self-discovery and it is not going to be pretty.

Chapter Summary

What did we learn in this chapter?

We learned that even DEA and FBI agents can be scammed by Ponzi schemes.

We learned that Wally Street can be a man or a woman and a Ponzi schemer.

Rick is trying to tell us that our financial advisor is just like Wally Street, but we at this point are not convinced.

We think that we are too smart to be fooled by the likes of a Wally Street.

We will soon learn that we are way too confident.

Chapter Two

Whatever is received is received according to the nature of the recipient.

~ Thomas Aquinas

Wally's Products

Wally, as you can imagine, is all about making money. To make money, he must sell the right products. The right products are the ones that pay the most commissions.

Variable Annuities

Non-Publicly Traded Real Estate Investment Trusts

UIT’s or Unit Investment Trusts

Stepped Up CD’s

Structured Products

Private Placements

Promissory Notes

Regulation D Offerings

Exchange Traded Notes (ETN’s)

Precious Metals

Floating Rate Bank Loan Mutual Funds

Class A Shares Mutual Funds

Class B Shares Mutual Funds

Class C Shares Mutual Funds

I’ll go over these products one by one, so you know which ones to avoid.

Variable Annuities

The main way that banks, insurance companies and Wall Street firms take people’s heads off is via this animal and I do mean animal.

The Variable Annuity (VA).

Generally, Variable Annuities have lots of expenses. A bare bones VA has expenses of about 2.5% according to Morningstar®. Wally loves to add on riders to his VA’s that he sells. These additional riders can cost anywhere from 0.50% to as much as 1.00% per rider! So, it is very possible to be sold a VA with expenses in the 3 – 4% range. Now, you do not have to be a smart person to figure out that if you are being charged 3 – 4% right off the top, then it makes it hard to make any money. Wally knows this, too. That is why he always wants to slam you into 100% stocks when you buy a VA. If Wally puts you in something that only had an expected return of 4%, then you would never make any money on your VA. Therefore, Wally is almost always aggressive with the investment choices that he (don’t make me laugh) recommends for his victims. Excuse me, I meant to say clients.

I wonder. Did Wally tell you that he makes 6 – 10% in commissions on a VA sale? Most of the time, he just says, sign here. Ever wonder why Wally wants to put so much of your money in VA’s? Now you know. A couple of hundred thousand ($200,000) in VA’s and Wally is making about $12,000 to $20,000 depending on the VA that he sells. That is a lot of money. At least it is to me. Wally earned every penny of that $12,000 to $20,000 too by saying sign here. It takes a lot of skills and training to say, sign here, so you should have no trouble paying Wally that kind of commission. Apparently, up to $2,500 per letter by saying s-i-g-n  h-e-r-e.

Oh, by the way, did you know that you will have a surrender charge period of at least ten years? That is if you live in Florida. In other states, it could be fourteen years or longer.

Please help me out a little bit here. Explain to me how buying a product with expenses that could be north of 3% per year, that you are stuck in for at least ten years, while Wally makes off with 6 – 10% in commissions, how does this benefit you? I am struggling to understand how a product whose sole existence is to generate revenue for Wally World and Wally Street, how does this benefit you, the client?

Sadly, I do not think you can give me a good answer to that question. As a result, I think I will move on. Don’t worry however. I will intersperse more of my thoughts on Variable Annuities throughout the book. I am nowhere near through discussing them.

Non-Publicly Traded REIT’s/BDC's

Everyone has heard about Ponzi schemes. Those Wally World guys are something else. They secretly changed the name of Non-Publicly Traded REIT’s to an official sounding name called Business Development Companies or BDC’s. That’s what they do in Wally World. When they get their hats handed to them by the regulators, they just circle the wagons, tweak the product a little bit and then give it a new name. So, when you see Business Development Companies, or BDC’s, now you know that these are just another name for Non-Publicly Traded REIT’s. Did you know that Non-Publicly Traded REIT’s (NPT REIT’s) or excuse me, I meant Business Development Companies (BDC's) are designed just like a Ponzi scheme? It is true. This is how it works.

You give them your money.

They take 11 -13% right off the top for expenses.

They pay you back your principal as an income stream.

This is exactly how Ponzi schemes work! That’s a fact, Jack. You cannot argue with my three points above. This is exactly, and I mean exactly how Ponzi schemes work.

There is no secondary market to speak of with these NPT REIT’s/BDC’s. Oh, don’t get me wrong. They will tell you that there is a market for them. Yes, there is a market, but it is about 70% of what you put in it. For example, if you put in $100,000, then right after your deposit, if you want to sell it, then you can maybe get 70% back. Does that sound like a secondary market to you? Not to me.

Imagine if you bought a stock and soon after you buy it, it is now worth 70% of what you paid for it. You would be livid if that happened to you. Wally has no conscious when it comes to selling these NPT REIT’s/BDC’s and I mean no conscious whatsoever.

Several years ago, I met an 86-year old man years ago who had $400,000 worth of these NPT REIT’s. Why do you think that is? Because it pays the Wally Street who sold them, 8.5% commissions! Let’s see. $400,000 times 8.5% commission equals $34,000 in commissions to Wally. Oh, by the way, the 86-year old man had a wife who lived in the local assisted living center. He came to see me and an Elder Law attorney, because he was going to have to start paying for her care and he wanted to know what he could do. You see, her Long-Term Care Insurance was running out soon. The sad truth is that he was going to have to foot the bill after that happened. Even sadder was the fact that the $400,000 in NPT REIT’s was not liquid!! In addition, he was going to have to take a big loss to get to his money!

Now imagine his request for money from the NPT REIT. Because of the liquidity restrictions, he might be able to get 70% of his money. After all, the managers of the NPT REIT take 11 – 13% right off the top as soon as the money is invested. Then, the managers of the fund must find someone who wants to buy a secondary market NPT REIT. The potential buyer of this investment will not want to pay full price for it. They will only buy it if they get a bargain. In case you do not know, assisted living centers can cost $3,000 to $4,000 per month. The elderly gentlemen will probably request a withdrawal of $50,000. Unfortunately, because he must go to the secondary market, he may have to liquidate around $71,000 worth of his NPT REIT shares to get the needed $50,000.

The bottom line is that he will lose about $21,000 in shares ($71,000 - $50,000) to get to his own money. Keep in mind that he must do this each year his wife is in the assisted living center. Further, the assisted living center was pressuring the elderly gentlemen to move his wife to the nursing home, which will cost $6,000 to $8,000 per month. Sadly, she was going to have to make this move very soon. That means he will need a bigger withdrawal from his NPT REIT.

This elderly gentleman had no trouble paying $34,000 in commissions to Wally Street for the Non-Publicly Traded REIT’s, but he thought the Elder Law attorney’s fully disclosed fee to get him out of the mess was too much. (More on Elder Care later in the book.)

Hey, I wonder. I wonder if Wally told him that he was making $34,000 in commissions. Further, I wonder if he told him about the liquidity restrictions, too. What do you want to bet that Wally quickly glossed over those items when he sold these NPT REIT’s to this elderly man?

This guy was in a heap of trouble because of a Wally Street who sold him this crappy, inappropriate product. The guy was in his eighties for goodness sakes! As they say on ESPN®, Come on, man!

Oh, by the way, this is all perfectly legal for Wally Street. Legal, but certainly unethical. This is the Wall Street machine that I want to stop ladies and gentlemen.

One of the guys who sold this man the NPT REIT’s even had a radio show for a while. Guess what he was promoting on his radio show?

Non-Publicly Traded REIT’s!

I cannot believe that his broker/dealer compliance department approved this guy to be on the radio hawking these Non-Publicly Traded REIT’s. Either his compliance department or the radio station finally wised up and kicked him off the air. Perhaps, he just hit a cold streak and could not pay the radio station their bill anymore. I’m not sure which of the three it was, but thankfully he is no longer on the radio.

The sad truth is that this elderly gentleman will lose thousands upon thousands of dollars by not letting the Elder Law attorney help him. The nursing home bill is not going to go away. In the end, instead of paying for an Elder Law attorney, he decided that he would rather give the nursing home owner his money instead. It was not a very good decision on his part. Hopefully, somewhere down the road, he wised up and went to an Elder Law attorney for help. Every month that he waits it is going to cost him $6,000 to $8,000 which is money he could have saved with an Elder Law attorney. I guess he could always go to Wally for help, because Wally is always looking out for him, isn’t he? After all, Wally is the one who sold him the Non-Publicly Traded REIT’s in the first place. I am sure he has a solution.

Another one of Wally’s sales pitches revolving around these Non-Publicly Traded REIT’s is the fact that:

Someday, they will take this REIT public and you will reap the rewards.

My responses and questions for Wally are the following:

"Excuse me Wally, but you can buy Publicly Traded REIT’s that are listed on the NYSE any day of the week without the 8.5% commissions and with full liquidity where I can get my money in as little as 2 days.

Why do you have to wait 10 to 12 years for the privilege with your Non-Publicly Traded REIT?

Also, doesn’t the firm that is selling this Non-Publicly Traded REIT already have several Publicly Traded REIT’s that are listed on the NYSE?"

If so, then why do I need to put so much money into your Non-Publicly Traded REIT?

Wally would be squirming in his seat if you asked him these questions. The truth is that Wally just wants to rake your ass over the coals and nail you with as big of a commission as possible by selling you this crap. That was one of my hickory switches, by the way.

The next time Wally tries to sell you a Non-Publicly Traded REIT or the very sophisticated sounding Business Development Company, run as fast as you can in the opposite direction. Run fast. Run very, very fast.

UIT’s or Unit Investment Trusts

This product is purely a Wall Street firm’s invention. When these first came about, CD rates were very high, like 6%. Wall Street firms