PERSONAL FINANCE - AARP not always best deal - A financial planner says the senior advocacy group's offerings can be more costly than those available elsewhere.
When financial planner Andrew Tignanelli's clients first came to him saying that they were planning to buy financial products from AARP, he said he was thrilled. He assumed that the products the group sold to its members, whether TVs or financial products such as insurance or mutual funds, would be the best and least expensive.
"But then when they showed me what they were getting and the price, I told them that I thought they could do better elsewhere," the Baltimore-based advisor said. "People assume that AARP is their advocate and doing the best for them. That isn't always the case."
Tignanelli has since done a market comparison of AARP products with those offered elsewhere, and he found that the senior advocacy group's offerings were often more costly. That's because the nonprofit group in fact has a profit motive, he said. About $400 million of the group's $1-billion annual budget comes from royalties and "service provider relationship management fees" earned on products that AARP sells, according to the organization's 2006 financial statement.
AARP, formerly known as the American Assn. of Retired Persons, says Tignanelli's analysis is too shallow. Although the organization does earn royalties on products it endorses, it takes great pains to develop offerings that provide good value to its members, said Adam Sohn, an AARP spokesman. Tignanelli's analysis doesn't account for all the bells and whistles in the group's products, Sohn said.
"This report is misleading and irresponsibly leaves out much-needed context," he said.
The debate underscores a simple truth: Consumers should consider their unique needs and shop around, no matter how much they trust a vendor.
This is doubly true with financial products, which are more complicated and difficult to compare than television sets. Indeed, AARP will match the price if a consumer finds a better deal on consumer products such as camcorders and TVs. But that can happen only because many retailers sell the same model of television set. Financial products, on the other hand, usually vary from vendor to vendor.
Consider mutual funds. The funds offered through AARP are managed by State Street Corp. and are diversified based on the investor's risk tolerance -- aggressive, moderate or conservative.
Valley Forge, Pa.-based mutual fund giant Vanguard Group Inc. offers similar investments through its LifeStrategy funds. These funds, however, are less expensive than the AARP offerings and reported considerably better returns in 2006 and the first half of this year, Tignanelli noted.
