Avoid Exploitation

Financial exploitation can take many forms, from outright scams to high-pressure sales tactics and misleading financial advice. In this episode of The Real World Money Show, John explores some of the most common ways individuals are taken advantage of and shares practical strategies for protecting yourself and your family.

You'll learn warning signs to watch for, questions to ask before making important financial decisions, and how to evaluate opportunities with a healthy level of skepticism. John also discusses the importance of education, due diligence, and working with trusted professionals when navigating complex financial matters.

Because one of the best investments you can make is learning how to avoid costly mistakes and protect what you've worked hard to build.

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SPEAKER_01 0:00

Securities and investment advisory services offered through LPL Enterprise. LPL, a registered investment advisor member, S-Inra, S-IPC, and an affiliate of LPL Financial. LPL and LPL Financial are not affiliated with Iron Eagle Advisors. Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual. Any guests are not affiliated with or endorsed by LPL Enterprise, LPL Financial, or Iron Eagle Advisors.

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And I want to start today with a confession. A while back, I did something that I tell my clients to do. I sat down and I actually looked at what I owned. Not the headlines, not the fund names, not the categories. I mean, I looked under the hood. I pulled up the actual list of companies inside my investments. And I did not love what I found. Because buried in there, mixed in with hundreds of other companies, were businesses I would never knowingly support. Companies whose entire business model is built on getting people addicted. Companies that profit from desperation, and companies that make their money by trapping people who are already struggling. I owned a piece of all of them, not because I chose them, but because they were tucked inside funds that I bought without looking too closely. And here's the uncomfortable part. I am a financial advisor. I do this for a living. And even I had not looked closely enough. So if it happened to me, I guarantee it's happening to you. Today's episode is a little different. We're not going to do the usual teaching format. Today, we're going to follow the money. I want to take you on a little journey. I want to show you what you probably actually own, where your money actually goes when you invest it, and what businesses you might be quietly supporting without even knowing it. This is the fourth pillar of stewardship-based investing. Avoid exploitation. And I'll be honest with you up front, this one is messy. It is not black and white. There are gray areas, there are hard choices, and there's no perfect answer. But that is exactly why we need to talk about it. Because if you're a steward, if you believe the money you're managing is not ultimately yours, then where it goes matters. It's not enough just to grow it, it's not enough just to diversify it. You also have to ask, what is my money actually doing out there in the world? So let's follow the money and find out. So let's start with a basic question. When you invest, where does your money actually go? A lot of people don't really think about this. They put the money in their 401k, they pick a fund, the number goes up over time, and they never really think about what's happening under the hood. So let me explain. When you buy a stock, you're buying a tiny piece of a company. You become a part owner. When you buy a mutual fund or an index fund, you're buying tiny pieces of hundreds, sometimes thousands of companies all at once. So if you own a typical index fund, you are most likely the part owner of hundreds of businesses. Most of them you've probably never heard of, and some of them you'd frankly be proud to own, and some of them you'd be quite ashamed to own if you knew. But all the same, you own all of them because you bought the whole basket. Now here's the thing: diversification, which we talked about before, tells you to buy the whole basket, spread your risk, own a little bit of everything. And that's good advice for managing risk, but it creates a problem with stewardship. Because when you buy the whole basket, you don't get to pick and choose. You own the good companies and the bad companies, the ones you admire and the ones that you would never support. You own the company that treats its workers well, and you own the company that exploits them. You own the company that makes a product you love, and you own the company whose entire business is built on addiction. It's all in the basket. And when you buy the basket, you get it all. So let me give you a real-world example without naming names. There's a category of businesses that make money from gambling. Casinos, online betting, the whole industry. Now, gambling is a $50 billion industry in this country and it's growing fast, especially online sports betting. These are big, profitable, publicly traded companies, which means they are in a lot of index funds. So if you own a broad market index fund, you probably own a piece of the gambling industry. You might be morally opposed to gambling. You might have watched it destroy a family member. You might believe it preys on the vulnerable, and yet you own a piece of it. Right now, probably without even knowing it. And here's another one: payday lending and predatory consumer lending. These businesses that lend money to desperate people at interest rates that can exceed 300 or 400% annually. Someone's car breaks down, they need 400 bucks. They can't get a normal loan, so they go to a payday lender and they end up trapped in a cycle of debt that may last for years. The Bible has some pretty harsh words for this: charging excessive interest to the poor, exploiting people in desperate situations. And these lenders are profitable businesses. Some are publicly traded, which means they show up in funds. So you might own a piece of the paid aid lending industry as well. The point is not to make you feel guilty. The point is to make you aware because people, most people anyway, have never looked. They've never followed the money, they've never asked, what am I actually invested in? And stewardship starts with awareness. You cannot make good decisions about something you've never examined. So the first step is to simply look, to follow the money, to find out what you actually own. Now, before we go any further, let me address something because some of you are thinking, John, is this really a faith issue, or are you just pushing your politics? And it's a fair question. So let me show you what the Bible actually says, because it says a lot. The Old Testament prophets had no patience for people who got rich by exploiting others. Amos chapter 8, he goes after people who, quote, trample the needy and do away with the poor of the land, end quote, who cheat with dishonest scales, who sell the poor for a pair of sandals. That's exploitation, getting rich off the backs of vulnerable people. And Amos says God hates it. Micah chapter 2, he condemns people who, quote, covet fields and seize them and houses and take them, end quote. People who use their power to take advantage of others. And Isaiah chapter 10, quote, Woe to those who make unjust laws, to those who issue oppressive decrees to deprive the poor of their rights, end quote. The prophets are relentless on this. Over and over, God cares about how you make your money, not just how much you make. And then there's Jesus. You know the story. Jesus walks into the temple and he sees the money changers, people who are exploiting worshipers, charging unfair rates, turning a place of worship into a place of profit. And Jesus, who is gentle and patient through most of the gospel, absolutely loses it. He flips the tables, he drives them out. He says they've turned a house of prayer into a den of robbers. That's the one time we see Jesus get physically angry and it's about financial exploitation. That tells you something about how seriously God takes this. Now, here's what I'm not saying. I'm not saying the Bible gives you a stock screening list. It certainly does not. I'm not saying every company is either pure or evil. It's not that simple. What I'm saying is there's a clear biblical principle. Profiting from the exploitation of vulnerable people is wrong. The prophets condemned it. Jesus physically confronted it. It runs throughout the Bible. So if you're a steward, if you take this seriously, you at least have to ask the question: Is my money profiting from exploitation? And if so, what do I do about it? And by the way, you don't have to be religious to care about this. Plenty of people who are not people of faith still don't want to profit from addiction, predatory lending, or exploitation. It's frankly just basic human decency. The idea that how you make your money matters, that you shouldn't get rich by hurting people. So whether you're coming at this from faith or just from conscience, the question is the same. What is my money doing out there? And am I, am I okay with it? So here's where it gets messy, because if this were simple, everybody would already be doing it. It's not simple. There are gray areas, and I want to walk through them honestly, because I don't think you should pretend this is easy when it's not. So let's say you decide to avoid gambling and payday lending. Okay, clear enough. But what about a company that makes a product that's fine in moderation but harmful in excess? Alcohol, for instance. Is owning a piece of a company that makes beer and wine exploitation? What about a company that's mostly good but has one division you don't like? What about a company that treats its workers well, makes a great product, but donates to political causes that you oppose? Where do you draw the line? The honest answer is there's no universal line. Different people draw it in different places. For some people, alcohol is fine, but gambling is not. For others, both are off the table. And for other sets of people, it's about how workers are treated, not what the product is. You have to figure out your own convictions and then apply them and apply them consistently. Gray area number two is you cannot avoid everything. And that's the hard truth, folks. You cannot build a perfectly pure portfolio. We live in a fallen world. Every large company has flaws, every industry has problems. If you try to screen out every company that does anything you uh disagree with, you'd have nothing left to invest in. So you can't avoid everything. The goal is not perfection, the goal is intentionality. You cannot screen out every imperfect company, but you can screen out businesses whose entire model is built on exploitation. There's a difference between a company that's imperfect and a company whose core product harms people. A company that makes phones but has labor issues in its supply chain, that's imperfect. Most companies are. A company whose entire revenue comes from getting people addicted to gambling? Little different. That's exploitation as a business model. You focus on the second category, not the first. And here's another uncomfortable one. Does avoiding these industries cost you money? A lot of people assume that values-based investing means giving up returns, that you have to sacrifice performance to invest with your conscience. The research on this is actually mixed. So, see, some studies show values-based screening cost you a little, some show it costs you nothing, and some shows it can even help because exploitive industries often carry hidden risks like lawsuits and regulations. But let's be honest, even if it did cost you a little, that's a stewardship question. Is it worth giving up a fraction of a percent of return to not profit from addiction and exploitation? For a lot of people, the answer is yes. For some, it's no. That's just a personal conviction. But at least make a conscious choice. Don't just default into owning whatever without ever asking the question. Gray area number four is the political trap. And here's the one I really want to warn you about. Don't let this become political. There's a whole industry now built around political investing on both sides. Funds that scream for one set of political values, funds that screen for the opposite set, and that's just a lot of marketing. They charge you higher fees to feel good about your politics. Stewardship-based investing is not about politics, it's about avoiding genuine exploitation. Business is built on addiction, predatory lending, taking advantage of the vulnerable. That's not left, that's not right, that's just conscience. So be careful. Don't get suckered into paying high fees for a fund that's really just selling you a political identity. Focus on the real thing. Focus on avoiding exploitation, not signaling your tribe. So let me bring this home to Charlottesville a bit, a little different way than usual. I'm not going to talk about concentration traps today. I want you to do something different. I want to give you a gut check. The neighborhood test. Here's the gut check. Imagine your money was visible. Imagine that instead of being hidden in uh 401k, everyone could see exactly what you owned. Your neighbors, the people at your church, the folks you see at the grocery store on Pan Tops or out in Crozet. Imagine they could see that you owned a piece of a payday lending company, the kind that traps your struggling neighbors in cycles of debt. Or how about a piece of a gambling operation that's taking money from families who can't afford to lose it? Would you be comfortable? Most people would not. And that discomfort tells you something. And here's what makes this real, right here in Charlottesville. The people being harmed by these industries are not abstract. They're your neighbors. The payday lenders along the commercial strips, the folks getting trapped, those are local families. The gambling losses, those are local paychecks that never made it home. When you profit from those industries, even indirectly through a fund, you're profiting from harm done to people in your own community. That's a different feeling than just abstract investing. So here's the stewardship question for today. If you believe the money you're managing is not ultimately yours, that you're a steward managing it on behalf of God, then ask yourself this. Would the owner approve of where this money is going? Would God be okay with you profiting from addiction, from the predatory lending, from the exploitation of the vulnerable? For most people who take their faith seriously, the answer is no. And if the answer is no, then you've got some work to do. Not out of guilt, but out of faithfulness. And here's the good news: there's actually freedom in this because once you align your investments with your values, you stop feeling that quiet discomfort. You stop feeling that nagging sense that something is not right. You can invest with a clear conscience. You can grow your wealth knowing it's not built on harm. That's not a burden, that's freedom. And that's what stewardship offers. Not just the financial returns, but a bit of peace. All right, so enough philosophy. Let's get practical. How do you actually align your investments with your values without blowing up your whole financial plan? Let me walk you through it. Step one is to actually look. This first step is the one that almost no one does. Just look. Pull up your investments. For each fund you own, find the list of holdings. Most fund companies publish this on their website. Look for top holdings or full holdings. You can also look up the fund and search for what it holds. You just look at what you own. You might be surprised. You might even be fine with all of it. Or you might find some things that really bother you, but you cannot make any decisions until you actually look. Step two is define your convictions. Decide what you actually care about. This is personal. I can't do it for you, but think about it. What industries would you be ashamed to own? What business models genuinely bother you? Where's your line? For a lot of people, the clear ones are gambling, predatory lending, industries built on addiction. But yours is your own. So write down your list. Be honest. This is your conviction, not anybody else's. Step three, look for screened funds. The good news is you don't have to build this from scratch. There are funds specifically designed to screen out certain industries. Some are faith-based, some are values-based. They do the screening for you. Now, two warnings. One, check the fees. Some of these funds charge a lot more than regular index funds. So make sure you're not paying way too much for this screening aspect. Two, check what they actually screen. Some funds say they're values-based, but the screening is pretty weak. Or it's screening for things you don't actually care about. Read the fine print. Make sure their values match your values. And step four, don't sacrifice diversification. This is important, folks. Don't let values screening wreck your diversification. Remember the last show, diversification is critical. You need to be spread across asset classes, geographies, and sectors. So when you screen, screen broadly, but stay diversified. Don't end up with everything concentrated in three companies just because they passed your screening test. The goal is a diversified portfolio that also avoids the genuine exploitation. Both things, not one at the expense of the other. Step five is start where you have control. In your IRA or your brokerage account, you have a lot of control. You can pick up screened funds, you can avoid certain industries. In your employer's 401k, you may have limited options. You can only pick from the funds they offer. So do the best you can with what's available. Don't let perfect be the enemy of good. Start where you have control, make the changes you can make, and don't beat yourself up over the things you cannot control. Step six is talk to an advisor who gets it. And this is where it helps really to work with someone because a lot of advisors will look at you funny if you say you want to avoid certain industries. They'll tell you that you're sacrificing returns, they'll try to talk you out of it. You want an advisor who understands values-based investing, who can help you build a portfolio that's diversified, that performs well, and that aligns with your convictions. By the way, that's what we do here at Iron Eagle Advisors. We help you invest in a way that grows your wealth while honoring your values. If you want help building a portfolio that's diversified, screened for genuine exploitation and aligned with your faith, give us a call or go to Iron EagleAdvisors.com. Of course, their phone number is 434-465-6485. And before we zoom out, I want to answer the questions I get every time this subject comes up, because people quite often push back, and the pushback is fair. So let me tackle three questions that I hear most often. Question one is isn't this just a drop in the bucket? People say, John, if I sell my tiny piece of a gambling company, it doesn't change anything. The company still doesn't even notice. So what's the point? And you're right, your individual decision does not move the company. One person selling a few shares does not shut down an industry. But that's not why you do it. You don't avoid exploitation because you're going to single-handedly bankrupt a bad industry. You do it because of what it does to you. When you profit from something you believe is wrong, it changes you. It makes you a little more comfortable with that wrong. It dulls your conscience. Stewardship is not about the impact on the world in a vacuum. It's about the impact on you, on your integrity, on your relationship with your money. You keep your hands clean, not because it fixes everything, but because it keeps you whole. Question two is where does it end? And this is a big one. People say if I start screening, where does it stop? Almost every company does something I disagree with. Am I supposed to research every single business I own? I'll go absolutely crazy. And it's a fair concern. And here's my answer: you're not trying to achieve moral perfection. You already know you cannot. We talked about that. So you focus on the clear cases, the businesses whose entire model is exploitation, gambling, predatory lending, the stuff that's not really a gray area at all. You don't have to agonize over every company that's ever made a questionable decision. You draw a reasonable line around the obvious stuff and let the rest go. Think of it like your diet. You don't have to eat perfectly to eat well. You cut off Off the stuff that's clearly bad for you, and you don't lose sleep over every single ingredient. Same with investing. Cut out the clear exploitation and don't obsess over the rest. Question three is what if my spouse disagrees? Folks, this is a real one. Been married long enough, and it comes up more than you think. One spouse wants to screen out certain industries, and the other says, I just want the best returns. I don't want to mix money and morality. So what do you do? First, you have a conversation. Really listen to each other. This is not about one person being right, it's about understanding what each of you values. Second, look for the overlap. Even if you disagree on the edges, you probably agree on clear cases. Almost nobody actually wants to profit from predatory lending, for instance, someone, something that traps struggling families. Start with what you agree on. Third, compromise where you need to. Maybe you screen the accounts you control individually. Maybe you agree on a few clear exclusions and leave the rest alone. The point is this should bring you together, not drive you apart. Money fights are one of the leading causes of divorce. Don't let values investing become another battleground. Let it be a conversation about what matters to you as a family. Notice that the common thread in all three of these questions, they're all about tension. The tension between ideals and reality, between what you believe and what's practical, between you and the people around you. And tension is okay. It's normal. It means you're actually wrestling with this rather than just ignoring it. Most people never even get to the tension because they frankly never ask the questions. They just invest blindly and not think about it. The fact that you're wrestling with these questions means you're already ahead. You're already on your way to being a steward. Before we close, I want to zoom out a bit because this episode is more than just about screening out a few bad industries. It's about a fundamental question. What is money for? And there's basically two views of money. The first view says money is neutral, it's just a tool, it has no moral weight. How you make it doesn't matter. How much you make is all that matters. Maximize it, period. That's the view most of the financial industry operates on. Returns are all that matter. The morality of where the money comes from is someone else's problem. The second view says money is not neutral. How you make it matters. Where it goes matters. What you do with it in the world matters. That's the stewardship view. And that's the view that runs through the entire Bible. And here's what I've come to believe: you cannot separate your money from your values. For too long, people have lived divided lives. They go to church on Sunday and believe one thing and they invest on Monday like none of it matters. They've never personally exploit a vulnerable person, but they'll happily own a piece of a company that does it at scale. As long as it's hidden inside a fund and it makes them money. That's a divided life. And stewardship is about healing that division. It's about saying my faith and my finances are not two separate things. They're connected. What I believe should shape how I invest. That's integration. That's wholeness. That's stewardship. And this completes the five pillars we've been talking about. Own nothing, manage everything. That's the mindset. Plan long, resist short. That's the patience. Diversify wisely. That's the risk management. Avoid exploitation. That's the ethics. And give generously. That's the purpose. Put them all together and you have a complete philosophy. A way of handling money that's wise, that's disciplined, that's ethical and purposeful. It's not about getting rich, it's about being faithful. And here's the beautiful thing when you handle money this way, you often do build wealth, but not as the goal, but as a byproduct of wisdom and discipline. But even if you don't end up rich, you end up faithful. And which is worth more to you. I started today with a confession and when I looked at what I owned and I didn't love what I found. So I did something about it. I made some changes and aligned my investments with my values. And frankly, I sleep better for it. I'm not telling you this to brag, and I'm not telling you this because I want you to do the same thing. I want you to look at what you own. Follow the money. Find out what businesses you're actually supporting. And then ask yourself the stewardship question. Would the owner approve of where this money is going? If yes, great. Keep going. If no, consider making some changes. The honest truth is this is not easy. It's not black and white, and there are gray areas, hard choices, and no perfect answers. You will not build a perfectly pure portfolio. Probably nobody can. That's not the goal. The goal is intentionality. The goal is to stop investing blindly and start investing thoughtfully. The goal is to close the gap between what you believe and how you invest. So here's my invitation to you this week. Just look. Don't overhaul everything. Don't panic and don't sell everything tomorrow. Just look at what you own. Follow the money. Start the conversation with yourself about whether it aligns with who you are. That's the first step. And that's the step almost nobody takes. But you're not almost nobody. You're a steward. And stewards pay attention to where the money goes. If you want help with any of this, building a portfolio that's diversified, screened, and aligned with your values, give us a call. It's exactly what we do. You know, someone once said that you can tell what a person truly values by looking at two things, their calendar and their checkbook. Where your time goes and where your money goes, that's what you actually believe. Everything else is just talk. So make them line up. If you don't have someone you're working with, or you feel like you're not getting clear explanations where you are, this is exactly the kind of thing we do at Iron Eagle Advisors. We sit down, we translate the jargon into plain English, look at all the moving parts, your investments, insurance, debt, retirement, taxes, goals, wants, needs, desires, the financial ones. Don't be going and getting any crazy ideas here. And we build a plan that actually fits a real person's life, not just a spreadsheet. If you'd like to schedule a conversation, you can go to www.ironegaladvisors.com and click on the Let's Get Started link, or you can call our office at 434-465-6485. Again, that's Iron Eagle Advisors.com or 434 465 6485. No pressure, no gimmicks. We talk and we see where you're at. And if we can help, great. If not, you may just walk away with more clarity than you had before. This is John Flick with Iron Eagle Advisors. Take care of your money this week so your future self doesn't have to look back and say, Well, that was dumb. Thank you for spending part of your day with me. What do you say we do it again? Say same time, same place next week.