More Agents Get Nailed For Selling Annuities

[Crabcake Johnny]

The heat certainly has been turned up on agents selling annuities under the guise of "financial planning" while not licensed to do so.

There is either a huge uptick in annuity agents being pursued or a big uptick in the incidences being reported. In either case, my gut feeling is this little "lashback" is a direct result of the financial industry losing control over annuities.

In retaliation they seem to be vigorously going after agents who convert large sums of money from investments/bank accounts into annuities.

The recurring phase is "unsuitable." That's a scary phrase since whether or not any investment is suitable is arguable.

The beginning of this article states $574,000 in "lost savings." What's "lost savings" mean?

infoZine - Missouri Blocks Two Insurance Agents from Securities Industry - Kansas City, Missouri News

"Otto’s clients knew he was moving their money, but they often ended up in unsuitable investments. Otto set up new accounts for clients at discount brokerage firms, gave himself power of attorney, and transferred the investments to these brokerages. He immediately liquidated the accounts and moved the investments into annuity products. Approximately half of the investors paid the high surrender fees required to get their savings out of the annuities sold by Otto or the other agents that used his services."

 

[Norwayguy]

Thats weird that he would set up new brokerage accounts only to immediatly liquidate them for annuities, when he could have transfered the accounts direct. The article says half of the clients ended up surrendering and paying the surrender charges which leads me to think the time frame of the investment was incorrect or the clients did not have other assets outside of the annuities which would be unsuitable.

Finally BLC strikes again.

 

[Crabcake Johnny]

"Bankers Life, agreed to reimburse the impacted investors by returning the $574,000 that was lost."

Just imagine that size of that chargeback!

 

[0b1kanobee]

I agree with Peter. The whole thing doesn't pass the 'sniff test'.

Which you won't here about are the thousands of clients out there who are suing their broker. Lot of that going on but you will never read a thing about it. At least I haven't seen anything except one large case.

There is a lawyer down in South Florida I meet once and all he does is go after investment firms. Big cases. I think most if not all of them are kept under wraps. I wish I could remember his name.

 

[DHK]

And you all miss the point again.

Otto’s clients knew he was moving their money, but they often ended up in unsuitable investments. Otto set up new accounts for clients at discount brokerage firms, gave himself power of attorney, and transferred the investments to these brokerages. He immediately liquidated the accounts and moved the investments into annuity products.

I would never want power of attorney over ANYONE'S account... unless I was properly registered and had proper E&O coverage for such activity. Power of attorney gives discretionary authority for trading in an account. Plus, power of attorney means you MUST act in the interest of the person on whom you have power of attorney... not your own interest. Whether that was clearly defined and documented is a different matter.

Never hold yourself out as a "financial planner"... but don't do anything STUPID!!!

However, it does make you wonder how the insurance company issued the annuity. If the client's didn't want them, how were they issued? I suspect some forged signatures were probably done for each contract.

 

[Crabcake Johnny]

I agree with Peter. The whole thing doesn't pass the 'sniff test'.

Which you won't here about are the thousands of clients out there who are suing their broker. Lot of that going on but you will never read a thing about it. At least I haven't seen anything except one large case.

There is a lawyer down in South Florida I meet once and all he does is go after investment firms. Big cases. I think most if not all of them are kept under wraps. I wish I could remember his name.

I've actually seen a few commercials on cable lately from lawyers telling people that if they lost money in the market they could sue their broker. Call now!!!

 

[sman]

With "Source of Funds" guidelines coming, you can expect more of these lawsuits and more agents either losing their license or getting properly licensed.

Annuity News -States Ready

"The guidelines are designed to help sellers know when they are crossing the line in making a recommendation that money be taken from a securities product and put in into an insurance product or from an insurance product and into a securities product"

 

[Crabcake Johnny]

Well I've been talking about this and getting blasted for years regarding this exact subject. An agent who only holds an insurance license is not properly trained to advise their client to move a dollar from their investments to an annuity.

 

[djs]

Suitability isn't that hard to meet. Unfortunately, some agents fail the common sense test and figure out what is most suitable for them, not the client.

Annuities are a great tool, but they are not a swiss army knife for suitability, simply because they pay higher commissions.

Dan

 

[DHK]

Licensing does NOT mean training.

Licensing does mean LIABILITY.

Licensing does mean regulatory compliance depending on the licensing acquired.

Just because I'm no longer registered as a registered rep doesn't mean that I don't have the "training". However, there's no loophole for those who are no longer licensed, yet have the training.

It looks like I'm going to have to form my RIA firm in the near future.