Author Topic: Sad...but really...what were these people thinking?  (Read 5321 times)


  • Bristles
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Re: Sad...but really...what were these people thinking?
« Reply #1 on: June 18, 2014, 07:58:17 AM »
That was really long, to be honest i didnt finish reading it. Though it was long, it never really gave much info.

Basically someone came to ATT when they were getting rid of their 401k and she had them roll it over into an IRA with her. Now those people are saying that she tricked them because they lost a lot of money. Maybe I missed it, but it didnt say what the fees actually were or what she had them invest in. I dont think there is enough info here to form an opinion.

Cpa Cat

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Re: Sad...but really...what were these people thinking?
« Reply #2 on: June 18, 2014, 08:53:42 AM »
They did say what she invested them in. Most of them were in variable annuities and REITs. The major losses were from REITs. Although the investors allege the variable annuities were also a poor investment choice, they didn't exactly get scammed - the variable annuities are doing what variable annuities are sold to do. I can't tell from the article if the variable annuity is within the IRA or outside of the IRA. I suppose if they're within the IRA, the advisor probably deserves the complaints on those - but the investor didn't technically "lose" their money.

The article talks about a few different financial advisors, and other investments were non-publically traded REITs (bought at a time-share style sales conference) and one guy who seemed to have invested his entire IRA in high-cost, low-return Puerto Rico munis that have lost a lot of value (his is probably the clearest indication of a guy who got scammed - there is zero reason to invest in munis in a tax-deferred IRA - and even if you wanted to invest in Munis, high-cost, undiversified munis are clearly a poor choice).

Basically what it comes down to, is that the advisors sold people inappropriate investments that had high up-front commissions. Most of the investors had the option to take a pension, but got talked out of it (or talked into being greedy).

Tl;dr: They got terrible advice. The advice seems to be unethical, but not illegal.


  • Magnum Stache
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Re: Sad...but really...what were these people thinking?
« Reply #3 on: June 18, 2014, 10:24:08 AM »
People in these forums generally have done more research on personal finance than the average consumer.  We're also more inclined to question everything in the name of efficiency.  We probably hear those pitches and think, "Hmm... a $600 up front bonus for choosing this investment? What's the catch,  how much are you charging me on the back end to make up for that, and how can I do it even more efficiently?"  The problem is that there are people who don't have the "question everything" mindset and probably don't read about personal finance for fun. 

I could see where a lot of people blindly trusted their broker.  Imagine a less financially savvy consumer being told "oh you'll make a lot more in this investment than your pension, be able to spend more money, be able to leave money to your kids!"  Despite the overly impressive claims, they'd probably trust this person especially if their good friend referred this person over.  The pension documents and information available through work aren't always easy to understand, since most of them are written in legalese (coming from someone who may work at one of the companies mentioned).  Someone who focused their sales on one company could probably explain the pension plan well enough that the average consumer would trust their knowledge and advice.  I have gotten calls from professionals offering this advice while I was at work.  Even when they say they do not work for the company, they make it easy to assume they were officially approved/sanctioned/etc. 

A non publicly traded REIT isn't something I would consider low risk but I'm a low cost index fund fan myself.  One person said she told the broker that she didn't want anything aggressive and she still was encouraged into these investments.  Fiduciary duty is a big deal.  Was it unethical, legally actionable, just bad advice, or good advice but a bad market?  I'm not sure but it probably also depends on each individual case.


  • Stubble
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Re: Sad...but really...what were these people thinking?
« Reply #4 on: June 19, 2014, 01:16:35 PM »
This is just sad all around.  Sad for people who didn't know what they were getting themselves into and don't seem to have any sense of an internal locus of control.  No one cares more about your money than you, and working with a professional does NOT absolve you from having a basic understanding of what you are choosing to do with your money.

But it also makes me sad to think of being one of those financial product sales people.  I can't imagine what it must be like to spend your life doing something that adds no value to the world.  It seems so hollow.  I can't imagine that you'd sleep well at night, even if you were making a lot of money.


  • Pencil Stache
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Re: Sad...but really...what were these people thinking?
« Reply #5 on: June 19, 2014, 03:21:38 PM »
It's one of these things where I feel awful for these people, but seriously people, caveat emptor.  You have a pension.  From AT&T.  Guaranteed income for life.  And you cash it in for some silly non traded REIT fund?

I hate to bring up my love/hate relationship with Dave Ramsey, but I hear him all the time tell people to cash out of pension plans and go invest in "good growth stock mutual funds by contacting our ELPs".  He advised someone yesterday to cash out of an immediate pension of $1500/mo in exchange for a $200,000 lump sum.  The guy was in his early 50s.  I'm sorry but that is just dangerous advice for someone who counts on that money.

People really really really need to do basic research for themselves.


  • Magnum Stache
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Re: Sad...but really...what were these people thinking?
« Reply #6 on: June 19, 2014, 04:23:54 PM »
^That depends.  I have a friends, a commercial airlines pilot, who had his pension gutted by his employer right before his retirement age.  Pensions from private employers are not as safe and "guaranteed for life" as we would like to believe.  I have one coming (in 20+ years) from a privately held company, and I'll be shocked if I see a single dime.  Government pensions are much safer because of political pressure, but nothing is a sacred cow.