Author Topic: Breach of Fiduciary by former Advisor? Is this Advisor a Con or Am I crazy?  (Read 2382 times)

sdt1890

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Background: My parents are not finance people and have limited understanding of the markets, in general. They have been with a financial advisor since about 2007. This guy got started in 2005 and I even had him invest for me as I got an early start as an entrepreneur at a young age and he invested around $20K on my behalf before I got out of high school (more to follow in college...). All of this money was accumulated through a ton of hard labor/small business I started at a young age, no handouts...

It seemed like the "right" thing for me to do at the time to follow in my parents' footsteps and start investing, but it is clear to me now, this was a HORRIBLE choice (more correctly, choosing this advisor was). He was individually picking stocks early on (nothing special, a lot of AT&T and Apple and other big name stocks) and he then proceeded to shift my accounts throughout the latter part of my college years to HEAVILY short the market with 3X leveraged ETFs (TZA, SDS) and leveraged metals ETFs (GDX). In short order before I knew what was going on, those 3 ETFs were 95% of my overall portfolio...

Admittedly, I was not keeping up with things like I should have (I was in college and young and dumb and trusted him as my advisor to make the right choices) and before I knew it, my account was destroyed through his decisions in these ETFs. Looking at it now, it is clear to me, those ETFs are beyond speculative, honestly it looks like it is straight gambling and I can't imagine ANY advisor recommending this strategy. Am I wrong?

Fast forward to today... I have severed my relationship with him, but have some of these ETFs still that are all down at least 50% (TZA worse than that)... I worked my a** off with the hope of getting ahead early in life and most of it was squandered away through his decisions...

This guy has gained a following and I've been told by one of his analysts (who I saw at a bar in 2015 randomly, he was intoxicated and spilling the beans) that they have grown their AUM to >$500 Million. Ever since 2010, this advisor has been predicting a crash and sends out weekly emails (more less fear mongering articles) to his clients, many of which are simple working class people, many of which I would guess do not understand the market... Given that the market fluctuates every 7-8 years, I'm sure his game is to try and look like a genius when there is a correction and until then, talk about it (can't lose this way)...

As his AUM has grown, he has increasingly been pitching and converting people like my parents to invest in insurance based products and annuities, OBVIOUSLY with HIGH FEES for him under the premise that he wants to "protect" their money as the "market is going to crash"... In my opinion, he is doing all this to shield his AUM and GUARANTEE his AUM fee with NO RISK. As long as he can convince his clients to get into these products, he locks in his AUM for however long the period is...

I'm still pissed about this personally (and ashamed I didn't see this earlier), but at least I now have a much better grasp on things and have a good career, so this should hopefully just go down as a hard and expensive lesson... Soo... to my original thread titled, not that it matters, but would you call this guy a con or am I crazy?

Also, my parents are still with this guy and I've tried to show them there are MANY better options out there, but they won't hear it... They are recently retired and I believe all of their accounts are tied up in insurance based products and annuities and they are paying him, I believe a 1% AUM fee each year for "signing them up". They don't see a problem with this as these products are "locking in 5%" and come with some sort of "bonus" of several percent as well??? Something along those lines... I'm not all that familiar, anyone seen these before? I can get the names later, but that's the premise.


MDM

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sdt1890, sorry to hear that.  Unfortunately this is not an uncommon experience.

You might look at BrokerCheck - Find a broker, investment or financial advisor and Investor Analysis of Index Annuities - Bogleheads.org.

It's likely that at some point you and your parents signed something that, in effect, says "I agree with what this broker is proposing."  Probably seemed innocuous at the time....

L.A.S.

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Yeah, it sounds like you found yourself in a bad situation.  Luckily you have gotten out of it.

Don't know what to say to say about your folks.  If you find something that works to get through, please share.  I'd like to know. 

pbkmaine

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Most financial types do not have to adhere to a fiduciary standard. There is a lower standard, suitability, that applies to many brokers. Breach of suitability is very hard to prove.

http://www.investopedia.com/articles/professionaleducation/11/suitability-fiduciary-standards.asp
« Last Edit: July 24, 2017, 07:32:35 PM by pbkmaine »

sdt1890

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sdt1890, sorry to hear that.  Unfortunately this is not an uncommon experience.

You might look at BrokerCheck - Find a broker, investment or financial advisor and Investor Analysis of Index Annuities - Bogleheads.org.

It's likely that at some point you and your parents signed something that, in effect, says "I agree with what this broker is proposing."  Probably seemed innocuous at the time....

Very likely what happened, my young brain at the time likely didn't think twice.

sdt1890

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Yeah, it sounds like you found yourself in a bad situation.  Luckily you have gotten out of it.

Don't know what to say to say about your folks.  If you find something that works to get through, please share.  I'd like to know.

Yes, it is a delicate matter as they think quite differently with my father being the main voice on this matter and he comes from a technical/computing background.


sdt1890

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Most financial types do not have to adhere to a fiduciary standard. There is a lower standard, suitability, that applies to many brokers. Breach of suitability is very hard to prove.

http://www.investopedia.com/articles/professionaleducation/11/suitability-fiduciary-standards.asp

Completely see where you're coming from. One detail I forgot to mention is that he makes it a point, a separate tab on his website, to discuss his Fiduciary Responsibility...

sdt1890

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The annuities my family is in are Athene. My father just said they are "before and after tax accounts". Should know more when I speak with him.

Also, a bit of humor. I just looked up the advisor's website and he has a new "Review" online that says "Are you looking for a financial advisor or an annuity salesman?" This was a recent review, so looks like this is still his game!

chaskavitch

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My parents were in a very similar situation.  Their financial adviser/tax preparation guy had them in some annuity that supposedly was locked in at 7% over 5 years or something, but there were huge penalties for pulling money out early.  THEN he told them that there was a different annuity that was better, so they should pull their money out and switch it over to this other annuity, never mind the penalties.

They ended up switching to a different adviser through Edward Jones, I think, who is a very nice young man.  He went through all of their investments, life insurance, etc. - it turns out their previous adviser was pulling almost 5% in fees!  My mom, who is a computer lab lady at an elementary school and makes ~$20,000/yr, had THREE life insurance policies, because "well, it's more difficult to get a policy once you turn 60, so we should get you a new one now, even though this other one isn't at the end of it's term yet.". 

Their new adviser is doing a much better job (still taking fees, of course), but I'm just sad that they spent so many years basically getting bilked.  They didn't question what their original adviser was doing because they lost a bunch of money during a market downturn in 2000, maybe, when they tried to hold their position, and then got scared and pulled out right at the bottom.

wenchsenior

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My parents were in a very similar situation.  Their financial adviser/tax preparation guy had them in some annuity that supposedly was locked in at 7% over 5 years or something, but there were huge penalties for pulling money out early.  THEN he told them that there was a different annuity that was better, so they should pull their money out and switch it over to this other annuity, never mind the penalties.

They ended up switching to a different adviser through Edward Jones, I think, who is a very nice young man.  He went through all of their investments, life insurance, etc. - it turns out their previous adviser was pulling almost 5% in fees!  My mom, who is a computer lab lady at an elementary school and makes ~$20,000/yr, had THREE life insurance policies, because "well, it's more difficult to get a policy once you turn 60, so we should get you a new one now, even though this other one isn't at the end of it's term yet.". 

Their new adviser is doing a much better job (still taking fees, of course), but I'm just sad that they spent so many years basically getting bilked.  They didn't question what their original adviser was doing because they lost a bunch of money during a market downturn in 2000, maybe, when they tried to hold their position, and then got scared and pulled out right at the bottom.

Ugh. And I consider Edward Jones to be more or less one big con operation.  But it is all relative; they are probably great compared with some advisors.

chaskavitch

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My parents were in a very similar situation.  Their financial adviser/tax preparation guy had them in some annuity that supposedly was locked in at 7% over 5 years or something, but there were huge penalties for pulling money out early.  THEN he told them that there was a different annuity that was better, so they should pull their money out and switch it over to this other annuity, never mind the penalties.

They ended up switching to a different adviser through Edward Jones, I think, who is a very nice young man.  He went through all of their investments, life insurance, etc. - it turns out their previous adviser was pulling almost 5% in fees!  My mom, who is a computer lab lady at an elementary school and makes ~$20,000/yr, had THREE life insurance policies, because "well, it's more difficult to get a policy once you turn 60, so we should get you a new one now, even though this other one isn't at the end of it's term yet.". 

Their new adviser is doing a much better job (still taking fees, of course), but I'm just sad that they spent so many years basically getting bilked.  They didn't question what their original adviser was doing because they lost a bunch of money during a market downturn in 2000, maybe, when they tried to hold their position, and then got scared and pulled out right at the bottom.

Ugh. And I consider Edward Jones to be more or less one big con operation.  But it is all relative; they are probably great compared with some advisors.

Yep, still between 1 and 2% in fees, I think, but infinitely better than the 5% they were paying before.  He's much more straightforward, too.  I considered trying to do it myself, but with a new baby I didn't feel up to figuring out what sort of investments you'd want if you had one retired spouse and one working spouse with low-ish income, plus SS and a military pension and military disability pay.  Too many factors I know nothing about right now.

L.A.S.

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My parents were in a very similar situation.  Their financial adviser/tax preparation guy had them in some annuity that supposedly was locked in at 7% over 5 years or something, but there were huge penalties for pulling money out early.  THEN he told them that there was a different annuity that was better, so they should pull their money out and switch it over to this other annuity, never mind the penalties.

They ended up switching to a different adviser through Edward Jones, I think, who is a very nice young man.  He went through all of their investments, life insurance, etc. - it turns out their previous adviser was pulling almost 5% in fees!  My mom, who is a computer lab lady at an elementary school and makes ~$20,000/yr, had THREE life insurance policies, because "well, it's more difficult to get a policy once you turn 60, so we should get you a new one now, even though this other one isn't at the end of it's term yet.". 

Their new adviser is doing a much better job (still taking fees, of course), but I'm just sad that they spent so many years basically getting bilked.  They didn't question what their original adviser was doing because they lost a bunch of money during a market downturn in 2000, maybe, when they tried to hold their position, and then got scared and pulled out right at the bottom.

Ugh. And I consider Edward Jones to be more or less one big con operation.  But it is all relative; they are probably great compared with some advisors.

Yep, still between 1 and 2% in fees, I think, but infinitely better than the 5% they were paying before.  He's much more straightforward, too.  I considered trying to do it myself, but with a new baby I didn't feel up to figuring out what sort of investments you'd want if you had one retired spouse and one working spouse with low-ish income, plus SS and a military pension and military disability pay.  Too many factors I know nothing about right now.

I'm glad you found a situation that seems to be working, and which is relatively better than the previous one. 

However, I would not assume that your EJ guy knows much about these factors either.  Of course he will say he does, and unless you and your folks become educated, how would you know otherwise? 

Chesleygirl

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I also fell prey to a Edward Jones financial adviser who scared me about "market crash" and I invested my IRAs with him. And wound up with a 1.35% AUM fee, along with other types of fees. Now I'm trying to sort through the mess as I've transferred it over to Fidelity. He didn't put me in bad stocks, though. Just a few things with high expense ratios and kept doing lots of trades in my account.

If your parents like this man, it's unlikely they'll let go. Many people who are, past a certain age, like to invest with a person rather than on a computer and talking to a faceless person on a 1-800 number. I was kind of the same way. I just don't feel comfortable without an advisor. I'm a little older myself and didn't like investing and doing transactions online. Frankly, I was scared to do it.


Fidelity has local offices and if you could get them to a Fidelity office, they could talk to someone face to face. Or perhaps, Charles Schwab, I believe they have local offices as well. These might be better for them than working with, say, Vanguard, where it's all done over the phone and internet.  It does sound like this man is a salesperson, rather than a financial advisor. You could try explaining to your parents about how he works on commission. That would be a start.
« Last Edit: July 25, 2017, 07:07:25 PM by Chesleygirl »

Indexer

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Background: My parents are not finance people and have limited understanding of the markets, in general. They have been with a financial advisor since about 2007. This guy got started in 2005 and I even had him invest for me as I got an early start as an entrepreneur at a young age and he invested around $20K on my behalf before I got out of high school (more to follow in college...). All of this money was accumulated through a ton of hard labor/small business I started at a young age, no handouts...

It seemed like the "right" thing for me to do at the time to follow in my parents' footsteps and start investing, but it is clear to me now, this was a HORRIBLE choice (more correctly, choosing this advisor was). He was individually picking stocks early on (nothing special, a lot of AT&T and Apple and other big name stocks) and he then proceeded to shift my accounts throughout the latter part of my college years to HEAVILY short the market with 3X leveraged ETFs (TZA, SDS) and leveraged metals ETFs (GDX). In short order before I knew what was going on, those 3 ETFs were 95% of my overall portfolio...

Admittedly, I was not keeping up with things like I should have (I was in college and young and dumb and trusted him as my advisor to make the right choices) and before I knew it, my account was destroyed through his decisions in these ETFs. Looking at it now, it is clear to me, those ETFs are beyond speculative, honestly it looks like it is straight gambling and I can't imagine ANY advisor recommending this strategy. Am I wrong?

Fast forward to today... I have severed my relationship with him, but have some of these ETFs still that are all down at least 50% (TZA worse than that)... I worked my a** off with the hope of getting ahead early in life and most of it was squandered away through his decisions...

Most of what he has done is, sadly, pretty normal. Individual stocks, loaded expensive active funds, annuities, etc. At places like Edward Jones, Raymond James, Merrill, Wells, etc. this is all status quo. 

Until you brought up the leveraged ETFs. Those you normally won't find at the above firms. Some independent advisors have been using leveraged ETFs improperly, because... well they just don't know what they are doing(at least IMO). Leveraged ETFs are NOT long term investments, the decay(link below) will often times eat away returns faster than high fees. Good news, FINRA(Financial Industry Regulatory Authority), the group that oversees brokers, issued a regulatory notice warning brokers about improper use of leveraged ETFs.

My favorite line from the notice, "While the customer-specific suitability analysis depends on the investor’s particular circumstances, inverse and leveraged ETFs typically are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets."

I use to work as an advisor years ago. Investing a retail client in something FINRA says is, "not suitable for retail investors," is not something I would want to have to explain to my compliance department or in an arbitration hearing. I would be interested to see his notes justifying putting a college kid in leveraged ETFs, especially if those ETFs were 95% of the portfolio. I would call FINRA and tell them your story. I am VERY interested to hear what they say.

FINRA notice: https://www.finra.org/sites/default/files/NoticeDocument/p118952.pdf

Leveraged ETF decay: https://seekingalpha.com/article/1864191-what-you-need-to-know-about-the-decay-of-leveraged-etfs
« Last Edit: July 25, 2017, 09:51:24 PM by Indexer »

sdt1890

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Background: My parents are not finance people and have limited understanding of the markets, in general. They have been with a financial advisor since about 2007. This guy got started in 2005 and I even had him invest for me as I got an early start as an entrepreneur at a young age and he invested around $20K on my behalf before I got out of high school (more to follow in college...). All of this money was accumulated through a ton of hard labor/small business I started at a young age, no handouts...

It seemed like the "right" thing for me to do at the time to follow in my parents' footsteps and start investing, but it is clear to me now, this was a HORRIBLE choice (more correctly, choosing this advisor was). He was individually picking stocks early on (nothing special, a lot of AT&T and Apple and other big name stocks) and he then proceeded to shift my accounts throughout the latter part of my college years to HEAVILY short the market with 3X leveraged ETFs (TZA, SDS) and leveraged metals ETFs (GDX). In short order before I knew what was going on, those 3 ETFs were 95% of my overall portfolio...

Admittedly, I was not keeping up with things like I should have (I was in college and young and dumb and trusted him as my advisor to make the right choices) and before I knew it, my account was destroyed through his decisions in these ETFs. Looking at it now, it is clear to me, those ETFs are beyond speculative, honestly it looks like it is straight gambling and I can't imagine ANY advisor recommending this strategy. Am I wrong?

Fast forward to today... I have severed my relationship with him, but have some of these ETFs still that are all down at least 50% (TZA worse than that)... I worked my a** off with the hope of getting ahead early in life and most of it was squandered away through his decisions...

Most of what he has done is, sadly, pretty normal. Individual stocks, loaded expensive active funds, annuities, etc. At places like Edward Jones, Raymond James, Merrill, Wells, etc. this is all status quo. 

Until you brought up the leveraged ETFs. Those you normally won't find at the above firms. Some independent advisors have been using leveraged ETFs improperly, because... well they just don't know what they are doing(at least IMO). Leveraged ETFs are NOT long term investments, the decay(link below) will often times eat away returns faster than high fees. Good news, FINRA(Financial Industry Regulatory Authority), the group that oversees brokers, issued a regulatory notice warning brokers about improper use of leveraged ETFs.

My favorite line from the notice, "While the customer-specific suitability analysis depends on the investor’s particular circumstances, inverse and leveraged ETFs typically are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets."

I use to work as an advisor years ago. Investing a retail client in something FINRA says is, "not suitable for retail investors," is not something I would want to have to explain to my compliance department or in an arbitration hearing. I would be interested to see his notes justifying putting a college kid in leveraged ETFs, especially if those ETFs were 95% of the portfolio. I would call FINRA and tell them your story. I am VERY interested to hear what they say.

FINRA notice: https://www.finra.org/sites/default/files/NoticeDocument/p118952.pdf

Leveraged ETF decay: https://seekingalpha.com/article/1864191-what-you-need-to-know-about-the-decay-of-leveraged-etfs

I would be curious to know what they think as well... That said, even if they completely agree, what could they actually even do though?

arcyallen2

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I'd be quick to remind everyone that none of us know a person's intentions, just their actions. While it is probably doubtful, it -is- quite possible the advisor this post is originally about actually believes a big market crash is coming. While I don't think shorting the market is the solution, his -intentions- shouldn't be assumed. And leveraged ETFs....yikes....usually the firm overlooking the advisor (if there is one) would throw up some red flags on this. If he's independent, well, that's a different story.

Also, I was an advisor for Edward Jones for years. They're one of the most conservative firms out there. While they do (and should) charge for their advice via loads, fees, etc. I think you'll be hard pressed to find a full service firm more client-focused. I know of advisors they've proactively fired (with no prompting from the client) for churning accounts. There's nothing wrong with bare bones Vanguard and Fidelity, but many many people want help and are willing to ask and pay for it.

If I had ever tried to sell a leveraged ETF, a phone call would have come pretty quickly asking why!

sdt1890

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I'd be quick to remind everyone that none of us know a person's intentions, just their actions. While it is probably doubtful, it -is- quite possible the advisor this post is originally about actually believes a big market crash is coming. While I don't think shorting the market is the solution, his -intentions- shouldn't be assumed. And leveraged ETFs....yikes....usually the firm overlooking the advisor (if there is one) would throw up some red flags on this. If he's independent, well, that's a different story.

Also, I was an advisor for Edward Jones for years. They're one of the most conservative firms out there. While they do (and should) charge for their advice via loads, fees, etc. I think you'll be hard pressed to find a full service firm more client-focused. I know of advisors they've proactively fired (with no prompting from the client) for churning accounts. There's nothing wrong with bare bones Vanguard and Fidelity, but many many people want help and are willing to ask and pay for it.

If I had ever tried to sell a leveraged ETF, a phone call would have come pretty quickly asking why!

The advisor is independent, so this was his brilliant idea.

Mighty-Dollar

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Quote
They don't see a problem with this as these products are "locking in 5%" and come with some sort of "bonus" of several percent as well???
He evidently sold them index annuities. These products are smoke and mirrors. And that 5% is NOT cash surrender value, so IN REALITY they are not earning 5%. That's merely a "roll-up rate" that will later be used as a basis for determining income payment rate if an when they choose to annuitize the contract. At that time their money STOPS growing (isn't that wonderful!). The REAL internal return that you get with ALL index annuities is between 1 and 3% -- not 5%.
BTW however long the "surrender period" is, this is likened to the commission that this con-artist advisor earned. For example a 15 year surrender penalty tells you that Mr. Advisor probably earned about a 13% to 14% commission. Now you know why he sold this garbage to your parents. The way to protect against stock market volatility is with diversification into bonds. http://investingadvicewatchdog.com/images-new/chart-2000-2015.jpg

“If your advisor thinks he can pick winning stocks, choose winning actively managed mutual funds, or time the market -- steer clear!” -- Whitecoat Investor

It can't hurt to contact the SEC about this advisor. Just tell them you're not sure if he did anything illegal. Let them look at the transaction this shark processed.
« Last Edit: August 02, 2017, 04:01:10 AM by Mighty-Dollar »

sdt1890

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Quote
They don't see a problem with this as these products are "locking in 5%" and come with some sort of "bonus" of several percent as well???
He evidently sold them index annuities. These products are smoke and mirrors. And that 5% is NOT cash surrender value, so IN REALITY they are not earning 5%. That's merely a "roll-up rate" that will later be used as a basis for determining income payment rate if an when they choose to annuitize the contract. At that time their money STOPS growing (isn't that wonderful!). The REAL internal return that you get with ALL index annuities is between 1 and 3% -- not 5%.
BTW however long the "surrender period" is, this is likened to the commission that this con-artist advisor earned. For example a 15 year surrender penalty tells you that Mr. Advisor probably earned about a 13% to 14% commission. Now you know why he sold this garbage to your parents. The way to protect against stock market volatility is with diversification into bonds. http://investingadvicewatchdog.com/images-new/chart-2000-2015.jpg

“If your advisor thinks he can pick winning stocks, choose winning actively managed mutual funds, or time the market -- steer clear!” -- Whitecoat Investor

It can't hurt to contact the SEC about this advisor. Just tell them you're not sure if he did anything illegal. Let them look at the transaction this shark processed.

To add fuel to this fire, I'm fairly certain he also charges them a AUM fee of around 1% on top of his commissions on the annuities... makes me fsaflajsf sick...

sdt1890

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Quote
They don't see a problem with this as these products are "locking in 5%" and come with some sort of "bonus" of several percent as well???
He evidently sold them index annuities. These products are smoke and mirrors. And that 5% is NOT cash surrender value, so IN REALITY they are not earning 5%. That's merely a "roll-up rate" that will later be used as a basis for determining income payment rate if an when they choose to annuitize the contract. At that time their money STOPS growing (isn't that wonderful!). The REAL internal return that you get with ALL index annuities is between 1 and 3% -- not 5%.
BTW however long the "surrender period" is, this is likened to the commission that this con-artist advisor earned. For example a 15 year surrender penalty tells you that Mr. Advisor probably earned about a 13% to 14% commission. Now you know why he sold this garbage to your parents. The way to protect against stock market volatility is with diversification into bonds. http://investingadvicewatchdog.com/images-new/chart-2000-2015.jpg

“If your advisor thinks he can pick winning stocks, choose winning actively managed mutual funds, or time the market -- steer clear!” -- Whitecoat Investor

It can't hurt to contact the SEC about this advisor. Just tell them you're not sure if he did anything illegal. Let them look at the transaction this shark processed.

Thinking about how to explain this to my parents... Does anyone know of the most simplistic way to explain the roll-up and fees associated w/ the annuities? Again, this will be to very non-finance people that trust this "advisor" and think I'm  just upset because my "investments" didn't work out with him and that is why I am not a fan of this guy.

MDM

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Thinking about how to explain this to my parents... Does anyone know of the most simplistic way to explain the roll-up and fees associated w/ the annuities? Again, this will be to very non-finance people that trust this "advisor" and think I'm  just upset because my "investments" didn't work out with him and that is why I am not a fan of this guy.
Note that there are none so blind as those who will not see.

You might ask your parents, "is there any information that would cause you to leave this advisor?"

If they say "no" then save your breath.  Otherwise you may get an opening.

sdt1890

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Thinking about how to explain this to my parents... Does anyone know of the most simplistic way to explain the roll-up and fees associated w/ the annuities? Again, this will be to very non-finance people that trust this "advisor" and think I'm  just upset because my "investments" didn't work out with him and that is why I am not a fan of this guy.
Note that there are none so blind as those who will not see.

You might ask your parents, "is there any information that would cause you to leave this advisor?"

If they say "no" then save your breath.  Otherwise you may get an opening.

Sooo true. Can't teach an old dog new tricks... particularly when the old dog is your recently retired father.

I sent him an article from Kiplingers talking about EIAs and he replied saying he is "not sure those are the same. Mine are 1, 2, and 4 year. A lot of products out there similar but not the same. My company alone has many products. I just moved some of the money and there was no surrender or other charges."

He went on to say "My returns are not capped. Min is say 4% or 5% and has been higher. Also the bonus money adds 3% or 4% on contract each year. So 12% bonus over say 4 years nets 3% pe year on top of my returns. First year or so withdrawals are limited but everything is up in 4 or less years and you start over then. So you have to be a little careful but just the short contract time of a few years."

MDM

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He went on to say "My returns are not capped. Min is say 4% or 5% and has been higher. Also the bonus money adds 3% or 4% on contract each year. So 12% bonus over say 4 years nets 3% pe year on top of my returns. First year or so withdrawals are limited but everything is up in 4 or less years and you start over then. So you have to be a little careful but just the short contract time of a few years."
Based on that, he is expecting his initial investment to increase by 8%/yr for 4 years, thus increasing by 36%.  When withdrawn, he will pay tax at ordinary income rates on the 36% increase.  If in the 25% bracket, that means a 27% net return.  All correct?

Well, just wait four years and check back.... ;)

Indexer

  • Pencil Stache
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....

I would be curious to know what they think as well... That said, even if they completely agree, what could they actually even do though?

They are FINRA. They are the regulatory authority for this sort of thing. They can do a LOT. I you are serious about this, call them. You might not be the only person who has been impacted this way.

Worst case scenario they can't do anything and it's a wasted phone call. Best case scenario for you, worst case for the advisor, he could get a disclosure on his record and have to partially or fully reimburse you.