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Monday, March 27, 2017

A View from the Other Side*

Posted by Dave on June 25, 2013

Dave is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.

My wife and I were provided with a unique experience last week. One of her co-workers was looking for a side-gig, which it turns out was a debt mediation service. He asked her to be a reference for his potential employer, which turned out to be more of a training session (my wife was too nice to let them know we weren’t interested). On the plus side, I got to see a whole spiel from one of these services – which took a total of 20 minutes and gave me some insight into an industry that I’ve heard of, but hadn’t been involved with.

It turns out the guy giving the presentation has been doing this debt mediation stuff for over a decade, and had just started up his full-service firm about a year and a half ago. It was stated right away that there was no pressure to buy anything, he was there merely to show us the products and services his firm provided (and to try and get us to allow him to prepare a financial outlook report).

We politely listened to the whole 20 minutes and then told him we weren’t currently in need of any of the services offered. He took this fine, and asked why and we told him that the only debt we had was our mortgage, and it would hopefully be paid off within a year. We were told that we were the first people in our 30s he has ever met that have been debt free (in his line of work, I can’t see how he would meet anyone doing phenomenally well).

My takeaway from this experience:

  1. People who need this kind of service probably don’t know they could seek it out, get competitive rates from financial institutions and increase their cash flow.
  2. Families who utilize this kind of service, reducing monthly expenses may not have the discipline to employ the freed up cash to pay down debt. I am assuming that the amortization period for these “refinancing” loans is fairly lengthy, as the example the sales guy used was a reduction of almost 50% in monthly expenses
  3. The interest rates quoted seemed quite high. On the investment side, the company was offering 8% for a “safe” investment, and 18% on “riskier” investment. Looking at the companies represented, they are providing moderately-priced mutual funds (the prices provided didn’t include costs, and I didn’t ask).

I think the service offered is good, if used appropriately. I’m just not too sure how much these people really care about the clients when they’ve gotten their referral dollars (how they get paid, instead of fees).

Have you, or anyone you know used this kind of service? Would you use something like this?
* I am not implying anything derogatory about the use of this type of service, simply pointing out that I have never been in a position to use products or methods advertised by companies like the one talked about in this post.

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