Greg Roberts

Greg Roberts

Several years ago, I was asked for some assistance by one of my high school teachers. It seemed that her 82-year-old husband, trying to protect their investments, was duped into purchasing an equity indexed annuity product that was totally unsuitable for their situation. The agent actually convinced the husband to combine monies from an IRA with separate non-qualified assets and lump them all together into a single investment. Moreover, the husband incurred a surrender penalty to move money out of an existing annuity, but the agent assured them that they would make up that loss with “bonus interest.”

Even the rankest financial amateur knows that co-mingling qualified assets with non-qualified monies is illegal and would have subjected this family to tax penalties. Thankfully I was able to unwind this mess and get the family’s money back without any problems, other than the agent muttering that I had cost him over $30,000 in potential commissions.

Then too, I recently assisted a widow whose entire investment portfolio had been invested in a variable annuity, which smacks of commission-mongering on the part of the salesperson. Once those dollars were in the annuity contract, he proceeded to sell her permanent life insurance and informed her that the premiums for the life insurance would be withdrawn each year “just like rich people do,” and that she would never know that the premiums had been paid.

It turned out that there were investment gains within that annuity, so the withdrawals were taxable by the widow, so she got hit with additional taxable income at income tax filing time. Oh yes, the agent never discussed with her any tax consequences of withdrawing money.

Another fear that older Americans have is losing money in the stock market, and that fear has opened the door to abuse by peddlers of equity indexed annuities. These contracts are essentially fixed annuities that offer the potential for modest gains from a linked stock market index of some sort. These products can be complicated, and many naïve seniors have purchased them after being told that they cannot lose any money, not knowing that inferior products often have overly long surrender penalty periods (would you believe 14 years?). Caveat emptor.

Frankly, it jars my preserves to learn of such financial chicanery targeting seniors, but the facts are that older Americans are more likely to find themselves with the means to actually purchase a financial product than are younger persons. That fact, coupled with senior traits of being more polite and trusting due to their upbringing, often makes them unwilling dupes for the unscrupulous insurance or other financial product salesmen.

Sadly, mature Americans are less likely to report fraudulent activity, because they either don’t know to whom to report it, or they are simply embarrassed that they were taken. Worse still, many times older folks are unaware that they have been swindled.

I began my insurance career in the life insurance industry in 1971, and I am pleased to report that the vast majority of life insurance salespersons are honorable, ethical individuals.

However, every harvest has its bad fruit, so it will pay to heed the following advice when considering the purchase of any financial instrument. Case in point, I just met with a widow who was told by an agent that, since she resembled his grandmother, he was going to treat her like his grandmother. Well, he lied.

Here are some important points to keep in mind:

• Visit if you think you have been misled or worse by a financial advisor or life insurance salesman.

• If you are in discussions with a salesperson of any financial product, ask a family member or advisor that you trust to sit in. If the salesperson proposes a specific product, get all the sales materials in writing and review them later.

• Do not allow yourself to be pressured into making any financial decision.

• Since unscrupulous salespersons typically hate questions, make certain you get complete answers to all your questions.

• Don’t sign anything you don’t understand completely.

• If you are given written materials to review, take them home with you and peruse them carefully and if need be, get a second opinion.

Greg Roberts is a certified financial planner with 35 years of financial and estate planning experience. Do you have a financial planning question for Greg? Email him at