Woodbridge Wealth Files Chapter 11 Bankruptcy

[scagnt83]

JJ2713 how did you read the tea leaves on this and know it wasn't legit and all the brokers who pitched it missed it? What makes you so special?

Basic professional knowledge about the investment industry, combined with logic, common sense, & rational thinking.

Also caring enough about the client to perform proper due diligence. In a bout 2 minutes I could tell this was a Security that was legally required to register with the State or SEC... but they were not.

Plenty of desperate agents out there who are willing to look the other way and not trust their best instincts. Plenty of unscrupulous agents out there. And plenty who are ignorant about the subject and just dont know any better.

 

[JJ2713]

JJ2713 how did you read the tea leaves on this and know it wasn't legit and all the brokers who pitched it missed it? What makes you so special?

Basic professional knowledge about the investment industry, combined with logic, common sense, & rational thinking.

Also caring enough about the client to perform proper due diligence. In a bout 2 minutes I could tell this was a Security that was legally required to register with the State or SEC... but they were not.

Plenty of desperate agents out there who are willing to look the other way and not trust their best instincts. Plenty of unscrupulous agents out there. And plenty who are ignorant about the subject and just dont know any better.

HealthGuy - You could have asked the same question and left out the second part. No reason for the sarcasm. I knew it was a scam, but not because I'm "special".

Scagnt83 answered it perfectly. Is he "special" too? No.

Just basic investment knowledge and due diligence.

1) If you have any knowledge or experience at all about investments, you knew in 1 minute that it wasn't legitimate.

2) This isn't the first time this type of investment turned out to be a scam. The way this was structured, it had ponzi scheme and scam written all over it.

3) There were so many problems with the investment itself. So many things that could go wrong. So even if it wasn't a scam, it's still not an investment anyone should consider.

4) The brokers pitching this were obviously just "selling" it. They romanticized the investment, pitching how wonderful it was. Again, with just a basic knowledge about investments, the pitch alone was off, so the investment itself must be looked at more closely.

5) The brokers who pitched it obviously are not good advisors, don't know what they're doing, and acted in a very unethical manner. I don't know what's going to happen to them, but they surely have a legal problem. You don't need any training in order to get your insurance license, so anyone can become a broker after just passing the state test (same with series 65 or 6/7).

 

[DHK]

Exactly. The biggest red flag lately is "recruiting" non-securities agents to sell something that isn't an insurance product by an insurance company. A professional would always ask "What could happen if this doesn't work out - because I know that my E&O wouldn't cover this risk?" As insurance agents, one should assume (there's that word again), we should be good at managing and mitigating risks - especially in our own practices, activities, and recommendations.

There are some quality exceptions. Reverse mortgages are one exception because these lenders heavily target insurance agents - but not to recruit them, but to partner their local mortgage consultants with local agents. (However, to take reverse mortgage proceeds and put them in insurance contracts... is generally frowned upon by insurance company compliance standards; but to buy life insurance as a result of the freed-up cash flow of the reverse mortgage is completely acceptable.) It's generally a good match.

 

[scagnt83]

You don't need any training in order to get your insurance license, so anyone can become a broker after just passing the state test (same with series 65 or 6/7).

There was no license required period I dont believe. It sure as hell was not a registered insurance product. So no insurance license needed per state regulations.

Some IMOs pitching it obviously required you to have a license if you were doing business with them... but that didnt make it an insurance product, or registered investment product.

It was nothing but red flag, after red flag, after red flag for this scam.

 

[JJ2713]

Exactly. The biggest red flag lately is "recruiting" non-securities agents to sell something that isn't an insurance product by an insurance company. A professional would always ask "What could happen if this doesn't work out - because I know that my E&O wouldn't cover this risk?" As insurance agents, one should assume (there's that word again), we should be good at managing and mitigating risks - especially in our own practices, activities, and recommendations.

There are some quality exceptions. Reverse mortgages are one exception because these lenders heavily target insurance agents - but not to recruit them, but to partner their local mortgage consultants with local agents. (However, to take reverse mortgage proceeds and put them in insurance contracts... is generally frowned upon by insurance company compliance standards; but to buy life insurance as a result of the freed-up cash flow of the reverse mortgage is completely acceptable.) It's generally a good match.

There was no license required period I dont believe. It sure as hell was not a registered insurance product. So no insurance license needed per state regulations.

Some IMOs pitching it obviously required you to have a license if you were doing business with them... but that didnt make it an insurance product, or registered investment product.

It was nothing but red flag, after red flag, after red flag for this scam.

You have to think about all the risks with the investment.
- What's the worst that can happen?
- Could you lose all your money?
- Could you lose more than all your money, like with futures and options on stocks/etfs/futures (not saying futures and options on stocks/etfs/futures are bad, but there is more leverage).
- How does the investment make money? Interest? Capital gains? Dividend? Rent income? Business income? What's the risk to any of those.

What are the tax implications?

Etc.

With Woodbridge... there were so many red flags. Too many to list.

There was an advisor in my local area who used to run radio 30-min infomercials pitching this. It was so disturbing. He and his partner also do annuities, investments, etc. (retirement planners). I checked their record on FINRA, and the guy already has complaints and lawsuits.

 

[JJ2713]

There are some quality exceptions. Reverse mortgages are one exception because these lenders heavily target insurance agents - but not to recruit them, but to partner their local mortgage consultants with local agents. (However, to take reverse mortgage proceeds and put them in insurance contracts... is generally frowned upon by insurance company compliance standards; but to buy life insurance as a result of the freed-up cash flow of the reverse mortgage is completely acceptable.) It's generally a good match.

There are so many uses for a reverse mortgage. It's a great retirement tool if used correctly, especially the growing line of credit.

Yes, I've heard that too... where the insurance agents get the person a reverse mortgage and then put the money into annuities, life insurance, etc. Just terrible.

Yes, one strategy is that if the person wants to use the reverse mortgage for themselves or the growing line of credit as a LTC alternative later on, they may not be able to leave the house with any equity to the kids, which may be concerning for them. But they could use the extra money now or the growing line of credit later on.

In this case, getting an additional life insurance policy for at least the value of the home to leave to the kids makes sense. But paid monthly, not SPL, so they don't take reverse mortgage money and put it into the SPL.

 

[DHK]

Heck - if the kids have the risk... let the kids pay the premiums on Mom and Dad equal to the current market value of the home.

 

[JJ2713]

Heck - if the kids have the risk... let the kids pay the premiums on Mom and Dad equal to the current market value of the home.

Yes, that's another legacy strategy. The kids paying premiums on the life insurance. Difficult to get the parents to understand this though.

Life insurance gives the highest ROI compared to other safe investments when the purpose is leaving money behind. It's like a AAA rated bond (+ state insurance), with a higher return than a AAA rated bond, with tax deferral, and the transfer (death benefit) is tax free.

Sure, someone could just put in stocks, but that doesn't have the same risk profile.

 

[scagnt83]

Un-regulated

No license or training required

Minimal financial transparency

No publicly published independent accounting

Huge risks to the underlying investing premise (way to many to list)

And "guaranteed" returns much higher than any other fixed investment on the market
(which is immediately the first red flag for anyone who keeps up with current fixed rates.... you cant pay more than a Junk Bond without taking on more risk than one... investments 101)

Those are just right off the top thinking back to when it was originally pitched to me by some shady IMO thats now out of business....

 

[DHK]

There is also the criteria for marketing unregistered securities (assuming that this would've been a security). Such investments are only available to SEC "qualified investors".

The SEC defines a qualified investor as someone who has a net worth of at least one million dollars or an annual income in excess of $200,000. Individuals who meet "qualified investor" status also can become victims of "private offering" unregistered securities scams.

What are unregistered securities or stocks?

I can guarantee you that Woodbridge was selling their products to nearly anyone who had money.