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Guarding Your Wealth for Seniors
Retired Variable Annuity Investor Gets Justice After
Loss
By Jeffrey D. Voudrie, CFP
May 7, 2006 Countless investors have lost large
portions of their investments. Some have been in investments where they
lost everything. But investors looking for help in recouping losses
often find there are few places to turn for assistance. Read on to learn
about one investor that finally got justice.
Many an investor has been harmed by their advisor’s
inaction or being put in unsuitable investments. It’s natural that those
feeling wronged seek retribution. So, where do investors turn if they
need justice?
For securities investments such as stocks, bonds,
mutual funds and variable annuities, it’s to the National Association of
Securities Dealers (NASD). The NASD is a self-regulatory organization
created by the securities industry, not a government agency.
In 1987, the Supreme Court ruled that investors can
be required to waive their right to sue in court in order to open a
brokerage account. Now all grievances with a brokerage firm must first
go through arbitration
Fifty-five percent of arbitration cases rule in the
investor’s favor. But the average settlement is about 12 cents on the
dollar. It so happens that the judges (even those deemed to be
independent) are from the securities industry! No wonder brokerage firms
prefer arbitration!
It is a long, expensive process to pursue
arbitration on an individual basis. When you look at the average
settlement, you will be lucky to cover your legal expenses. Your chances
can be greatly improved, though, if you are one of many members in a
group that had similar experiences with the same broker or firm. Think
of it as class-action arbitration.
That’s how Bob finally got justice. He invested
$750,000 in a variable annuity recommended by an advisor in 2000. Three
years later Bob’s investment was only worth $350,000. When Bob became my
client in November of 2002, there was little recourse he could take.
About a year later, though, he saw an advertisement
in the local newspaper about a seminar just for those retirees of his
company. It was put on by an out-of-state attorney that specialized in
handling arbitration cases.
It turns out ‘Bob’ wasn’t the only victim. Many of
his fellow retirees used the same advisor that he did. Almost all had
virtually the same experience. Collectively, they were able to get more
of the attention they deserved during arbitration.
After 3 long years, Bob has received a settlement
check for $166,000. It doesn’t make Bob whole, but it sure helps ease
the pain. Bob was one of the lucky ones.
Guess what happened to the broker? Not much. There
won’t even be any hint of the problems he caused on his permanent
record. That means other investors will never know what this advisor did
to ‘Bob’ and his fellow retirees. That means it can happen to them, too.
You see, the advisor you use could have lost
investors hundreds of thousands of dollars and you will never know about
it. There’s no way to know if your advisor has had cases go to
arbitration in the past. There’s no way to know if he/she has any
current cases in arbitration.
So what can you do to protect yourself?
First, ask your advisor if they have ever had any
written complaints and/or cases that went to arbitration. Verify their
answer and/or do a broker check at www.nasd.com.
Second, find out how the advisor will monitor and
manage your investments on a day-to-day basis. Beware of the advisor
that does nothing. Look for an advisor that has specific procedures in
place to monitor and manage your account. Few do.
Third, make sure you have the ability to make
changes should something go wrong. That’s why I am so adamantly opposed
to investments that have long-time commitments or big surrender
penalties. They limit your options, making it expensive to switch
investments down the road.
Fourth, if you’ve been wronged, try to see if there
are others in the same boat. Search the internet for existing
class-action lawsuits and see if you can join.
Typically, the problem is the advisor, not the type
of investment. Use one that will prevent a significant loss from
happening in the first place. Bob was able to recover a portion of his
loss. Justice was served.
If you have a specific question or would like more
information give me a call toll-free at 1-877-827-1463 or go to
www.guardingyourwealth.com. You can also reach me by email at
jeff@guardingyourwealth.com.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Please
visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive.
Guarding Your Wealth for Seniors are
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens. Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For booking information, email e-mail
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