I’ve been slammed over the last few weeks talking with prospective clients. We are open for business is an understatement. One area that I continue to hear about from prospective clients is how they wish they didn’t buy that annuity. I’ve written to you before about these toxic products (for example here, here, here, here and here).
The issue is that annuities are sold with a full-court press on those that don’t invest for a living. They’re promised rates of return that sound good on paper but will be wiped out if the insurer goes bankrupt and the government doesn’t bail it out.
With interest rates at basically zero there is no way insurers can meet the promises they’ve made. It’s a hope and prayer. It’s why I would never put any serious money into an annuity. And yet the scum that get barred from selling this stuff are allowed to come back to work.
The Wall Street Journal‘s Michael Wursthorn reports on this sad trend here:
Matthew John Davis sells annuities as an investment adviser in California. Two years ago, he was barred from the brokerage industry after he declined to respond to allegations that he forged documents and falsified clients’ account values.
Mr. Davis is one of dozens of former brokers who were permanently or temporarily barred by regulators from working at a brokerage firm but who have begun new careers as investment advisers. The transition is legal, but the nuances between the professions of broker and investment adviser can be lost on mom-and-pop investors, experts say, potentially exposing them to bad actors.
The former brokers, whose alleged misdeeds run from violations of brokerage-industry rules to outright fraud, can benefit from the fragmented landscape that governs investment advice in the U.S. Brokers are overseen by an industry self-regulator, the Financial Industry Regulatory Authority, and have to give only “suitable” advice on investments. Investment advisers are overseen by state regulators and the Securities and Exchange Commission and are held to a “fiduciary” standard that requires them to put clients’ interests ahead of their own.
Do you have an annuity nightmare to share with me? Please help the uninitiated and share your story with me by emailing ejsmith@youngresearch.com
