Author Topic: Should I tell a client they’re working with a swindler?  (Read 2060 times)

tede02

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Should I tell a client they’re working with a swindler?
« on: August 08, 2019, 07:36:41 AM »
I’ve found myself in an tough spot. Three years ago, one of my clients disclosed to me that he put a material amount of his investable assets into an annuity contract. This came as a surprise to me because I’ve worked with this guy for years, have a good relationship, etc. The transaction didn’t have any impact on my working relationship with the client and it may work out just fine for him as he transitions into retirement in 5-10 years. However, from day one I was concerned that he got pitched something from a salesman that didn’t have his best interests in mind. This week, I decided to broker check the guy who sold him this contact. To my astonishment, the guy has TWENTY FIVE complaints/disputes/misconduct allegations ON RECORD that have resulted in hundreds of thousands of $$$ in refunds and settlements over the last eight years. I feel like I’m in a tough spot because I manage money for the client. Do I say, “Hey, you should probably be aware of this,” or just keep my mouth shut? I’m just concerned that coming from me, the client may feel like I’m just bashing this other guy, and the client’s decision to buy the contract in the first place (and somehow the whole thing backfires). What would you do?


Paarslaars

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Re: Should I tell a client they’re working with a swindler?
« Reply #1 on: August 08, 2019, 07:47:54 AM »
Start the conversation by framing why you are informing him. Clearly state that you are merely trying to inform your client and have his best interest at heart and that he is free to do whatever he wants with that information.

stahleyp

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Re: Should I tell a client they’re working with a swindler?
« Reply #2 on: August 08, 2019, 07:52:13 AM »
I don't think I've ever seen anyone with that many complaints.

Paul

oddballstocks

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Re: Should I tell a client they’re working with a swindler?
« Reply #3 on: August 08, 2019, 08:44:26 AM »
Ugh, really tough spot.

I found out some family members were swindled by something similar about 12-13 years ago.  Retirement in high fee annuity and homes refinanced to interest only pre-crash.

I built out the case, showed some trust worthy family members who understood and tried to figure out the right plan of action.  One had asked me for financial advice, I showed her the broker check stuff, how bad her deal was etc.  She let us work with her to unravel things and get out.

Her brother was in much deeper.  We had an "intervention".  It didn't turn out the way I expected.  This relative didn't believe any of the allegations were true.  Some were things like "Impersonating the IRS" and using trademarks that weren't his.  The relative just totally disregarded any facts and evidence we had because "the advisor said it wasn't true, and there are mistakes online."

This is what you're battling.  The advisor knows this is out there and they have answers for it.  Your client trusts that advisor, so they're going to trust the answers as well that they're given.

No one likes to know they've been taken.  You need to figure out what you're going to do, and how can you present a win-win solution without anyone losing face.

Also consider that for whatever reason they felt like this product had some place in their portfolio.

From our perspective (and yours) this was a really stupid move on their part.  But if you want to help them you need to be sympathetic and be on their side.  That this is something anyone could have been tripped up in, etc.
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Parsad

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Re: Should I tell a client they’re working with a swindler?
« Reply #4 on: August 08, 2019, 09:03:19 AM »
I’ve found myself in an tough spot. Three years ago, one of my clients disclosed to me that he put a material amount of his investable assets into an annuity contract. This came as a surprise to me because I’ve worked with this guy for years, have a good relationship, etc. The transaction didn’t have any impact on my working relationship with the client and it may work out just fine for him as he transitions into retirement in 5-10 years. However, from day one I was concerned that he got pitched something from a salesman that didn’t have his best interests in mind. This week, I decided to broker check the guy who sold him this contact. To my astonishment, the guy has TWENTY FIVE complaints/disputes/misconduct allegations ON RECORD that have resulted in hundreds of thousands of $$$ in refunds and settlements over the last eight years. I feel like I’m in a tough spot because I manage money for the client. Do I say, “Hey, you should probably be aware of this,” or just keep my mouth shut? I’m just concerned that coming from me, the client may feel like I’m just bashing this other guy, and the client’s decision to buy the contract in the first place (and somehow the whole thing backfires). What would you do?

I've had to deal with this on at least four separate occasions in the last 20 years.  I sat them down, put all of the information I had gathered in front of them, and helped them figure out options to deal with it...not once did I suggest to bring the capital to me to invest.  That way, I cleared my conscience of what I know, helped a friend/client deal with a potential investment timebomb, provided them solutions or options, and never made it about not investing with me. 

You won't believe the results.  Only in one instance did they actually do anything about their portfolio.  Three let it ride with the advisor...one brought it over to me to manage. 

Of the three that let it ride with the advisor...one who was put in an inappropriate annuity ended up ok and got their money back at the end of the annuity...one who was letting their cousin invest their portfolio at a local brokerage kept losing huge sums each year in penny stocks...and the last one who put it in an inappropriate, ill-liquid investment ended up having to let it ride because they could not redeem, and ended up losing 75% of their RRSP.

Cheers!
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Read the Footnotes

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Re: Should I tell a client they’re working with a swindler?
« Reply #5 on: August 08, 2019, 09:25:49 AM »
The annuity industry has been booming over the past couple of years. We should all be on the look out for unscrupulous actors selling annuities in particular.

Parsad and Oddball do a great job of laying out a range of possible responses. I suspect a salesman who has racked up 25 complaints is either working with a very sketchy organization or is likely a narcissist or a psychopath. They are likely VERY charming. Assume this salesman is charming and might even work to inspire deep loyalty among their victims.

I think you have to try though. You may not have seen the fire itself, but you have seen plenty of smoke.


stahleyp

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Re: Should I tell a client they’re working with a swindler?
« Reply #6 on: August 08, 2019, 09:39:38 AM »
I was talking to a guy who knew of an insurance sales guy who was pulling down a ton of money but was really shady.

Supposedly, someone once asked the insurance sales guy how he sleeps at night and the salesman said something to the effect of "in the finest sheets known to man."

Paul

Gregmal

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Re: Should I tell a client they’re working with a swindler?
« Reply #7 on: August 08, 2019, 09:42:33 AM »
I was talking to a guy who knew of an insurance sales guy who was pulling down a ton of money but was really shady.

Supposedly, someone once asked the insurance sales guy how he sleeps at night and the salesman said something to the effect of "in the finest sheets known to man."

Par for the course for those types. Also drive leased cars and live paycheck to paycheck, aided of course by American Express.

bookie71

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Re: Should I tell a client they’re working with a swindler?
« Reply #8 on: August 08, 2019, 09:48:04 AM »
I believe that their moto is, "I make money, the company makes money and two out of three isn't bad"
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tede02

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Re: Should I tell a client they’re working with a swindler?
« Reply #9 on: August 08, 2019, 11:02:55 AM »
I appreciate the input. I was looking further at the broker-check disclosures. The aggregate settlements paid out on the 25 disputes is around $2 million! How does this person not banned from the financial services industry. I think I'll ultimately bring the issue up with my client genuinely out of concern.