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Rouge Broker Steals $1.3 Million From an 89-Year old!

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By Mack Bekeza

On July 2016, FINRA discovered that Travis Wetzel, a former broker who was originally barred from the industry in 2013, had been making fraudulent annuity withdrawal requests for an 89-year old’s Variable Annuity with Prudential. Once Prudential got wind of this, it immediately investigated the situation and discovered that the withdrawals were being made from an account in the broker’s wife’s maiden name! Overall, there were a total of 114 withdrawals made to this account between July 2010 through September 2012. Unfortunately for Prudential, even though it responded promptly and reimbursed the 89-year old, it was fined $950,000 by FINRA for failing to spot this while the withdrawals were being made.

Even though this story seems to be very unfortunate for both the 89-year old and Prudential, things like this happen more frequently than most people would think. For instance, MetLife was fined $25 million dollars for similar reasons. And, on top of that, LPL has paid over $12 million in fines and restitution for failing to supervise fraud in variable annuities, non-traded REITS, and even certain ETFs.

Since variable annuities are complex products that are mostly sold to the elderly, FINRA places a very high level of scrutiny on possible fraudulent activity. And, it can be quite a task for brokers to spot these transactions since they process millions of transactions on a daily basis. So, being able to spot fraudulent activity the minute it happens can be nearly impossible. In fact, it can take up to a couple of years to find out what exactly happened!

Is there anything the client can do to avoid these mishaps? Fortunately, yes, there is! Individuals can hire a financial advisor, such as Castle Rock Investment Company, that operates as a fiduciary to help them make the right choices and not get sucked in by a dishonest broker. Another thing that a client can do is look up their broker or investment advisor through FINRA’s Broker-Check website to see if they have had previous client complaints. Although most financial professionals are honest people, it is important that individuals seeking financial advice do their homework to see if they are walking into a trap.

© 2016 Castle Rock Investment Company. All rights reserved. Please share your insights with us at mack@castlerockinvesting.com or via phone at 303-719-7523

Save Up to Break Stuff: Retirement Saving Should Not be Taken Lightly

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By: Katherine Brown, Research Associate, Castle Rock Investment Company

My grandmother loved to drive. After they took away her license, she enthusiastically offered the use of her 1989 Crown Victoria to anyone who was visiting her, whether they had a car of their own or not. She also purchased a motorized scooter to get around her elegant, eerily silent retirement home. Often, the only sound was the elevator music playing through the halls and the whirring of the small motor on her scooter.

My grandmother loved to drive fast. Gran’s scooter was notorious for knocking down other nursing home residents, potted living and plastic plants, and the occasional painting from a wall. Ever the charmer, she would convince the staff not to take away her precious wheels. And she always paid for the damage that she caused because her husband and children set up a generous retirement fund for her.

This chart is intended for hypothetical illustration only, and is not intended to be representative of the past or future performance of any particular investment. It assumes a 7% average annual total return with no withdrawals or distributions, and reinvesting of all dividends and capital gains. Actual rates of returns cannot be predicted and will fluctuate. It does not reflect an actual investment, nor does it account for the effects of taxes, any investment expenses or withdrawals. Returns are not guaranteed and results may vary. Investment returns cannot be predicted and will fluctuate. Investor results may be more or less.These stories aren’t possible without comfortable retirement savings. Rather than a funny family story, this could easily be a sad tale of an elderly woman who crashed into something and had to move out of her residence because the cost of damages were too high. In a worldwide Future of Retirement survey, 18% of US citizens said they would never be able to retire from all paid employment.

You don’t know where your passions will take you, or whether your spouse’s bad driving will become the stuff of family legend. Saving for retirement should not be taken lightly. Though you may not like to think about growing old, you will need an income one day when you’re no longer capable of earning one. Care for your 401(k) by saving as early as you can.

In case you can’t picture it, Merrill Lynch offers a free face aging service on their website. If you’d like to peek into the future and see what you’ll look like at 90, try it out.

 

Katherine Brown completed a Master’s degree in Global Finance, Trade, and Economic Integration from the University of Denver. Her research and writing focus on international monetary economics and central banking. She can be reached at Katherine@castlerockinvesting.com.