One of my clients faxed me this month asking that I liquidate his IRA to allow him to invest the funds in a guaranteed annuity. The client explained that he knew market-driven investments had greater growth potential, but that the annuity would give him a guaranteed return. The client stated that he was not interested in further discussion about the matter, that the annuity would provide him with a guaranteed return, and that he understood all the pros and cons. I quickly liquidated his investments, and then sent him an email to inform him that the funds were available for transfer sebi registered investment adviser. Surprised, the client called me right after I sent the email. The client informed me that he didn't want his assets immediately liquidated. This was contrary to the instructions I received by fax. The client also expressed interest in my opinion on the annuity he was considering. He was eager to review any analysis I could offer. It became clear that the financial advisor selling the annuity had written the correspondence I received. The communication did not reflect the client's wishes. I believe that the advisor had presented an unrealistically positive assessment of the product he was suggesting and was trying to prevent the client from getting an objective opinion about the annuity. STRIKE A ONE advisor After speaking with the client, the name of the financial adviser who promoted the annuity was entered into Google. The Utah Insurance Department filed a complaint against the advisor. The State discovered that the plaintiff had a recording of an advisor saying things like "there is no risk" when making investments. This was illegal and misleading. Clients were also guilty of signing incomplete documents in connection with annuity applications. Blank spaces were left unfilled. The advisor was placed on probation for 12 month and fined. He also had to take additional ethics courses. STRIKE TWO to the advisor. (I understand that baseball requires three strikes. However, this strike should be sufficient for investors to seek financial advice from another source. The client decided that it was in his best interests to have a three-way discussion between him, the advisor who promoted the annuity and me. I agreed that such an appointment would be beneficial, and invited the discussion in my office. To do my due diligence, however, I requested a copy the annuity contract that he was considering before I could meet him. Because annuities can be so complex (which is purposefully so), it took me several hours to understand and decide if the contract was right for my client. The client accepted and asked me to fax or email the information. A week later, on the morning of my appointment, I informed the client I hadn't received the information (despite numerous requests) and that it would not be beneficial to hold the meeting until I had had the chance to review the material. The client accepted and the meeting was cancelled. The annuity salesman arrived at my office at the appointed time to inform me that the client still planned to attend. I inquired why I hadn't been given a copy of relevant material prior to the appointment. The advisor said that he had been out of town for the past week. The advisor claimed that he had never been able to email or fax me a simple Microsoft Word document. During the week, however, the advisor had held multiple conversations with the client. It is hard to believe that advisor or any of his associates never had the chance to email me during a week of clear communication with the client. I believe that the advisor didn't want anyone to see the pros and cons of his product. TRIKE THREE to the advisor. He's out! The saga continues. The advisor arrived at my office prior to the client so I suggested that I read the contract as soon as the client arrived. This would allow us to have productive conversations. Despite my repeated requests, the advisor refused to allow me time to read or permit me to keep the contract. STRIKE FOUR. To make sure I was as informed as possible before I arrived at the client's house, I agreed that the advisor would "walk" me through the material he had provided. The advisor then placed the document on my desk, pointed out the guaranteed return, and quickly flipped the page. The advisor then quickly flipped the page, pointing out the bonus return applied to new contracts. He finally pointed out the income schedule for the annuity contract and quickly turned it around. It was clear that the annuity's benefits were being highlighted while the fine print (or details) were being ignored. STRIKE FIVE. At this point, the advisor informed me that the exercise was not helping to develop my understanding about the annuity and that I should read the contract. The advisor replied, "I'm an expert on annuity; I should be able to explain the product." It became obvious that the advisor would not allow me to review the product. As a result, any conversation between us and the client wouldn't be an educated discussion about financial planning or what was best for them. I refused to continue the conversation with the advisor and asked him to leave my office. I stated that the client was interested to hear my opinion on the annuity, and that he should give me the contract so that I could tell the client my thoughts and answer any questions. The advisor wouldn't let me see the contract again and refused to leave it with me. STRIKE SIX. The advisor was asked by the client to leave a copy the materials he brought to the meeting and return to his office. After spending several hours reviewing the contract, it became clear that the annuity had many major drawbacks which were not clearly communicated to my client. I concluded that the annuity was not a very attractive investment. How can one trust their financial advisor? The term "financial adviser" is often misused and can be misleading. What is the last time you were introduced to someone as an annuity salesman or stock broker? These terms are no longer used because all financial advisors refer to themselves as such. These people can look like sheep in wolves' clothes. An annuity salesman calling himself a "financial adviser" will recommend an annuity to you 100% of the time regardless of whether it is in your best interests.
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