The Financial Industry Regulatory Authority (FINRA) recently issued a report outlining is its regulatory and examination priorities for 2012. The securities industry regulator is focusing on conduct and products meant to beat the market that are unsuitable investments for many investors.
The Wall Street Journal has reported that financial scams against the elderly are becoming so commonplace that the National Council on Aging calls them the “crime of the 21st century” (“Scams to Watch Out For,” WSJ). It describes investment scams against baby boomers (those over age 50) as being “rampant.” (“Boomers Wearing Bull’s-Eyes,” WSJ, Kelly Greene). The Wall Street Journal has now published a brief but helpful article entitled “Red Flags of Elder Fraud.”
Continue reading "Some Warning Signs of Elder Fraud" »
Variable annuities are complex financial products designed to transfer the risk of market loss from the investor to an insurance company. Assuming the investor is risk averse (after 2008, who isn’t?), the question is, is it a good deal? The answer, according to MONEY Magazine and most advisers that do not sell variable annuities for a living, is no. (“No Pot of Gold,” Lisa Gibbs, MONEY Magazine). Whether the answer is yes or no, an investor needs to be an actuary as well as a competent, very careful reader of fine print and convoluted legalese to fully understand exactly what he or she is buying, how it is priced and whether or not it is a good deal. Most investors are not up for that job.
Continue reading "MONEY Magazine - Variable Annuities Aren't Worth the Cost" »
Preparing for retirement should include preparing for the risk of diminished mental capacity, according to noted financial writer Jane Bryant Quinn (“Losing Your Grip?”). It is an unpleasant fact of life that, as we age, we become less competent to make financial decisions. A 2009 study on financial decision-making found that this ability peaks at age 53 and declines thereafter, according to Ms. Quinn’s article. Another study at Texas Tech University revealed that what we lose 2% of what we used to know about financial matters each year after age 60, but, paradoxically, we gain confidence as we lose this knowledge. All of this makes us vulnerable to serious financial errors and even fraud, according to Ms. Quinn.
Continue reading "AARP Article Urges Seniors to be Vigilant in Watching Out for Financial Scams" »
Financial industry lobbyists know that money is the key that opens doors on Capitol Hill. Trade groups representing the insurance, securities brokerage and financial advisor industries are lobbying and donating huge amounts of money in an effort to buy hearings and sway votes on legislation and rulemaking they deem important to their interests, according to an InvestmentNews article by Mark Schoff Jr. entitled “Industry trade groups flex lobbying muscles.”
Continue reading "Wall Street Pays to Play" »
The time is ripe for financial scammers who seek to take advantage of senior investors. Recently a 76-year-old Texas insurance agent was sentenced to up to 15 years for selling fake annuities to other elderly investors. The scammer in this case just happened to be the same age as many of his elderly victims. Mr. Langford apparently stole close to $7 million from dozens of clients through the sale of phony “private annuities” and promissory notes that promised interest rates as high as 9%.
Continue reading "Seniors Are Increasingly Targeted in Financial Scams" »
Investors, especially in retirement accounts, are pouring money into so-called “stable value funds” but the stability of those funds is not as advertised. The funds are often sold as higher-yielding money market funds, but they lack the safety and stability of a money market fund. Also, the higher-than-money-market yield and stability come at a price - locking up investors’ money and imposing hefty surrender charges on certain withdrawals.
Continue reading "Stable Value Funds Aren't So Stable" »
More than a year after it was created by the Dodd-Frank financial reform act, the U.S. Securities and Exchange Commission (SEC) opened its Office of the Whistleblower on August 12, 2011. According to a statement released by SEC Director of Enforcement Robert Khuzami, “early and quick law enforcement action is the key to preventing securities fraud and avoiding investor losses, and the whistleblower program gives us the tools to help achieve that goal.” Investor rights attorney Craig T. Jones of Page Perry LLC in Atlanta agrees: “This program will catch fraud sooner because it gives Wall Street insiders a significant cash incentive to be the first to come forward with information about abusive practices. Not only will whistleblowers and their attorneys profit from doing the right thing, but the investing public as a whole will benefit.”
Continue reading "New SEC Whistleblower Office Opens" »
Renown Yale economist Robert Shiller recently issued two warnings that investors should carefully evaluate. Shiller is well known for predicting both the recent housing crash that began in 2006 and the tech crash in 2000-2001. While investors should always be skeptical of predictions, Shiller’s track record is such that his predictions are worthy of consideration. At present, he predicts that stocks are overpriced by approximately 40% and that housing prices could fall an additional ten to twenty-five percent over the next several years.
Continue reading "Expert Issues Warnings Regarding the Stock and Housing Markets" »
Sales of deferred variable annuities have increased since the 2008 market crash as investors wary of the stock market are lured by promises of guaranteed lifetime income and protection against market declines, according to a Bloomberg article by Margaret Collins entitled “Lifetime-Income Promise Fuels Surge in Variable Annuity Sales.” But many financial advisors are not recommending variable annuities to their clients because of the high commissions and other costs and the complexity of the product that requires an actuary to determine whether or not the benefits exceed the costs, according to Lavonne Kuykendall’s InvestmentNews article entitled “Annuity fees a turnoff for clients and advisers.”
Continue reading "Many Questions Arise When Considering an Investment in Variable Annuities" »
Daniel Indiviglio writes that Wall Street is designing a new derivative that would allow purchasers to hedge against longevity risk (or speculate on it) in his article entitled “Death Derivatives: Has Wall Street Finally Gone Too Far?” in the Atlantic.
Continue reading "Wall Street Wagers on Death Benefits" »
Life Partners Holdings, Inc. and its two top officers have received a Wells notice from the Securities and Exchange Commission informing them that the SEC staff intends to recommend a civil enforcement action against them for allegedly misrepresenting the life expectancies of insureds whose life insurance policies it sold to retail investors, according to a Wall Street Journal article by Mark Maremont and Leslie Scism entitled “Life Partners Could Face SEC Action.” According to the article, Life Partners has sold billions of dollars of these policies.
Continue reading "Life Partners is in the SEC's Crosshairs" »
As the elder population increases, various forms of elder abuse are on the rise. This includes investment fraud and outright theft. Scam artists especially target senior citizens who have seen their investment portfolios decline in value.
Continue reading "Many "Senior Specialists" Are Anything But !!!" »
Zeke Faux’s Bloomberg article, “Indexed Annuities Can Yield Surprises,” focuses on complexity of the contracts that obscure high fees and long lock-up periods, and the fact that investors do not understand these products.
Continue reading "Buyer Beware of Equity Indexed Annuities" »
Bloomberg commentator Susan Antilla smells a rat. Wall Street is “fighting full-tilt” against the SEC’s whistleblower proposal that would tend to expose hidden wrongdoing. The SEC is “barraged” with their objections. “That’s not how people behave unless they’re hiding something,” Ms. Antilla says in her Bloomberg.com article, “Madoff Repeat Odds Rise With Neutered Watchdog….”
Continue reading "New Whistleblower Law Has Corporations Running Scared" »
Sales of indexed annuities to seniors is a form of senior financial abuse. That is what experts are saying about the product that is being aggressively and successfully marketed to seniors. See “Indexed annuities ‘terrible idea’ for seniors, says Wharton prof,” InvestmentNews, Jan. 24, 2011.
Continue reading "Indexed Annuities are Particularly Bad Investments for Senior Citizens" »
The Securities and Exchange Commission recently recommended that stockbrokers be required to put the interest of their clients in front of the stockbroker’s bottom line. However, stockbrokers are not the only advisors who put themselves first, according to an article by Anna Maria Andriotis of SmartMoney.com. Advisors from all different spectrums have incentives in selling certain products to customers in order to improve their personal bottom line.
Continue reading "Some Financial Advisors Don't Put Their Clients' Interests First" »
Zeke Faux’s Bloomberg article, “Indexed Annuities Obscure Fees as Sellers Earn Trip to Disney,” focuses on the undisclosed fees and perks that incentivize agents to gloss over negatives like substantial surrender charges that penalize purchasers who might need to sell the product to meet an unexpected expense.
Continue reading "Index Annuities are Extremely Rewarding - For the People that Sell Them" »
Beware of index deferred annuities, says Lisa Gibbs in her CNNMoney article, “Index annuities are a safety trap.” If your goal is to protect principal, you give up too much for that protection in an index annuity; there are better ways to do it, according to the article.
Index annuities account for a disproportionately large share of investor complaints, according to the article: “According to data that 16 states provided to MONEY, index annuities accounted for 30% of annuity-related complaints to regulators in 2009, even though they represent just 13% of annuity sales. In senior-heavy Florida, it was 55% of complaints.”
Continue reading "The Financial Press Continues Its Attack on Equity Index Annuities" »
Leslie Scism’s Wall Street Journal article, “Insurers Sued Over Death Bets,” describes how life insurance policies sold to investors, who expect to receive a big payment when the insured dies, have led to lawsuits by insurance companies and investors against each other, as well as by relatives of some of the deceased elderly, alleging that death benefits belong to the family members.
