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Guarding Your Wealth for Seniors
Seniors Targets of Financial Charlatans
By Jeffrey D. Voudrie, CFP
President, Legacy Planning Group
Sept. 29, 2005 - Seniors in your community may be targets of
financial charlatans. I’ve received a number of disturbing reports
recently from seniors about the abusive tactics of some advisors. Their
actions are not only unethical, but they border on the criminal. You
must be aware of these despicable tactics so you and your nest egg are
protected.
A charlatan is defined as one who attracts
customers with deceptive tricks. They look for easy marks and quick
profit. Equity Indexed Annuities have a high commission and a sales
pitch that is enticing to risk-averse seniors, so they are often used by
these shady advisors.
Even though I am against Equity Indexed Annuities,
I do not believe that everyone who sells them is a charlatan. Many
advisors are trying to offer an investment that they believe is in their
client’s best interest. There are a large number of advisors, though,
who are unscrupulously taking advantage of their client’s trust.
Warning 1: Any advisor who recommends 100% of your
investable assets be placed in ANY investment or investment category is
looking after their own interests, not yours. Beware of following any of
their recommendations.
For example, John (not his real name) is 80 years
old and lives in a retirement community in south Texas. There are over
2,000 other retirees in his community and 5 similar communities next to
it. Since seniors and retirees are the ones with money to invest, these
communities are heavily targeted by advisors in search of a commission.
These advisors start by offering free pizza and a
seminar at the local community center. Who doesn’t like free food,
especially when you’re living on a fixed income? Lots of folks enjoy the
food and listen to the pitch.
In John’s community, these charlatans then started
going door-to-door pushing an investment they portray as a way to avoid
income tax, avoid probate, and earn a safe, risk-free return. John, like
his neighbors, was skeptical at first. It sounded too good to be true.
The advisors were relentless. They kept showing up
at his house, calling him on the phone and wooing him with the wonderful
benefits he would enjoy. In the end, they convinced him he needed to
invest ALL of his money into an annuity contract lasting 10 years. He
sold stock he’d held for decades and invested that so he would pay less
income tax.
These charlatans used John’s fear of paying taxes
and losing money in the market to trick him into a decision that he
already regrets. They seemed so genuine. The more they talked the more
confused John became. Surely any second thoughts he was having were just
his fault.
Warning 2: Never sign any paperwork without first
reading it and taking the time to fully understand everything it says.
If you are confused, seek a second opinion.
John signed their paperwork—and wasn’t even aware
of what he was signing. They didn’t give him time to read it and, not
being a sophisticated investor, he wouldn’t have understood it if he
had. The papers he signed are designed to protect the advisor from legal
liability for their actions. Those papers place all the responsibility
on the investor and are like a get-out-of-jail-free card for the
advisor.
The consequences of John’s decision are painful and
difficult. By selling stocks he’d owned for years, he will now end up
paying capital gains taxes he otherwise wouldn’t have had to. He is
currently in the lowest tax bracket anyway. In the long run, he will end
up paying more in taxes with the annuity, not less!
Now John has very little access to his money. Even
if he dies, it is likely his heirs will have to pay significant
surrender penalties to get money out of the annuity. If John needs or
wants his money several years down the road, there is a good chance he
will get back less than he invested because of these penalties.
This unethical behavior would not be tolerated by
the SEC. But Equity Indexed Annuities aren’t regulated by the federal
government. That lack of oversight opens the door for financial
charlatans to take advantage of unsuspecting seniors.
If you suspect you or someone you care about is
being a target of such schemes, please contact me for free, unbiased
advice on what you can do at
jeff@guardingyourwealth.com.
Have a financial question? Send me an email and
I’ll personally respond, free of charge. Go to
www.guardingyourwealth.com and click on ‘Ask Jeff’.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Please
visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For booking information, email e-mail
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