Seniors Beware of Phony Investments

There are many financial advisers who take advantage of seniors by befriending them. Check out what happened to my family.

For the past several months, I’ve been helping my parents out of a financial mess.

About a decade ago, my parents were victims of a Ponzi scheme.  A financial planner came to their home in Long Beach and convinced them to invest in various stocks and bonds.  They received statements every month and thought their investments were doing great.  Until the day they tried to withdraw their money — there wasn’t any  to take out!

Since then, the financial planner, who came to their little home in the west end of Long Beach in a limo, went to jail.  I hope he’s still there.

That was one of the hardest times in my parent’s lives. My dad was so distraught.  They didn’t know what to do.

They sold their home and moved full time to Florida.  They didn’t have much of a choice. It was much less expensive in Florida than Long Island and they had to weigh their options.

Thankfully, the investment’s they made were insured and they received most of the money back.  But it took a long time.

After that, they lived in Florida and things were going well.  Until, they met another financial planner at their local clubhouse.  My mother really liked this guy.  She thought that he could help them make money with the little money they had.

He convinced them to put their life savings into annuities. A couple of years later, he had a change of heart and told them to take it out of the annuities and put it in three new annuities. (In the meantime, little did they realize, the money they withdrew had stiff penalties and they lost more than $30K.)

How do I know all this?  After my mother got very sick and was in the hospital in early April, I had a talk with my parents. I told them I could help them with their finances and pay their bills.   My mom had always been the one to do this all these years and I knew this would be a big help to both of them.

When I started to go through their paperwork, I saw these annuities and I was concerned. They came due in 2044. I shook my head and said to my dad, “I don’t know if I’ll be around in 2044. Your grandchildren will be grandparents at that time.”

“You know Hilary,” my dad said, “Mom and I trusted the financial planner. He told us to sign a million papers and told us he would take care of the rest. He never explained anything to us. He also insisted that we shred statements and such.  We trusted him.”

Later, I found out that what the financial planner did was illegal. He sold an annuity to a couple over the age of 70 who only had a pension and social security as their income.

This financial planner made hefty commissions off my parent’s so called investments and interestingly had a second home in the north where he spent the summers.

That’s when I said we needed to get this money back without penalties.  I told these annuity companies my folks needed the money for medical help, which they did.  They didn’t know at the time what would happen with Mom. They were spending a lot of their money on aids to help her get dressed, take her to the bathroom and with other daily living skills.

Now all their money was tied up for the next 30 years and they had access only if they took steep penalties. How scary was that?

Thankfully, one of the companies returned the money in full immediately after I sent out the letter.  One company went through a more careful due diligence process.  To date, we got back some of the money back but they are now giving us a hard time getting the rest back.  The third company refused to give back anything without penalty. So that’s where we’re at at this point.

What scared me most about this situation is there are countless others out there who probably experience the same thing and don’t even realize it!

We tend to trust the people who are nice to us. That’s human nature.  But, all I have to say here is, please if you are a senior over the age of 65, be careful when investing your money with a financial planner.  Read all the fine print and do your own due diligence before becoming a victim of another person’s success.

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Jack August 21, 2012 at 08:02 PM
I am sorry to hear of your ordeal, and unfortunately, it is a common story. Many people are scammed out of their investments by crooks and unscrupulous peddlers. Often, this is due to ignorance and the complexity of investments. I have seen this up close. A relative of mine had a 401k plan from a previous employer. These are known as "qualified funds," in other words, money that is already tax deferred. This relative had someone close to them starting a new career as an "investment advisor." In this case, really a fancy term for an insurance salesman. What did he do? Take the already qualified funds and put them into an annuity from an insurance company. This so called "retirement investment" carried a yearly 3.5% fee, and a 7 year penalty lockdown. I reviewed the relative's portfolio in the 6th year. The annuity had lost 30% of its value. When the lockdown period ended, we promptly removed all the funds and closed the annuity. The moral of the story is to educate yourself. People enormous amounts of time and money on their physical health with diet and exercise. They do the same with their mental health with education and seminars. Unfortunately, most people fail at addressing their financial health, and leave the important work to "trusted advisors." These people are the most susceptible to fraud, scams, and crooks.
Hilary Topper August 21, 2012 at 09:29 PM
There are many, many financial planners who are good people and make sound investments. It's just unfortunate that this happened and I wanted all seniors to be aware so that it doesn't happen to them! Thanks for your comments Jack!
michael janin August 23, 2012 at 11:14 AM
What you reported has little meaning.. If this was a variable annuity then the funds selected ( stocks bonds etc ) are selected by the annuitant or owner of the policy. If this was a fixed annuity, then all aspects of the policy would be guaranteed. It is very common to" transfer money from qualified plans into qualified annuities. The info you gave showed nothing wrong. I wonder if the fund had gained 10% woulld you have been happy. Without disclosing the age, the assets and the typ of investment risk these people were looking for, it would be inpossible to make truthful comments about this situation.
Jack August 23, 2012 at 03:44 PM
Janin's comments show exactly how seniors and others get duped. First of all, what I mentioned had a lot of meaning, as far as a short comment will allow. Yes, in my example, the variable annuity my relative was transferred to had investments she selected. And that is part of the issue as the insurance company offering the annuity offered only PROPRIATIARY investments. They had no ticker symbols. There was no independent analysis by Morningstar or other company. The only place to find these funds was in the variable annuity. Does that make these funds bad? No, but this choice problem is amplified by the high fees these funds came with. I can get an index fund in any IRA with a .1% yearly fee. The funds in this variable annuity all were saddled with 2% or higher fees. And your comment that it is "very common" to transfer money from qualified plans into qualified annuities...sure it is common, when unscrupulous peddlers and salespeople dupe investors to do just that. Let me ask you this...why transfer qualified funds to a variable annuity, with the lockdown and wraparound, when you could just as easily transfer to an IRA with no restrictions? And the investor could then add NON QUALIFIED funds to a new variable annuity. You do know about that right? Oh wait, you don't. My guess is that you are yet another in a long line of insurance salesmen, now licensed to sell investments. And your investment "advice" consists of exactly what your sales training told you to say.


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