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One of my clients sent me a fax earlier this month requesting that I liquidate his IRA so that the funds could be invested in a guaranteed annuity. The client stated in the letter that he was aware that market-driven investments have a higher growth potential, but that the annuity would provide him with a guaranteed return. He also stated that he did not want any further discussion on the subject, that he was aware of the benefits and drawbacks of the annuity, and that he did not want to be contacted any further.Do you want to learn more? Visit Hawley Advisors
I immediately liquidated his investments after receiving his instructions and sent him a brief email informing him that his funds were ready to be transferred. When the client called me shortly after I sent the email, I was taken aback. The client specified that he did not want his assets liquidated right away. This was in direct contradiction to the faxed instructions. It was also clear early on that the client wanted to hear my thoughts on the annuity he was considering and was eager to look over any analysis I could provide. At this point, it became clear that the letter I had received had been written by the financial advisor who was selling the annuity to the client, and that the communication did not reflect the client’s wishes. My suspicion is that the advisor painted an unrealistically positive picture of the product he was recommending in order to prevent the client from getting an unbiased opinion on the annuity. STRIKE ONE in the advisor’s favor. Following my conversation with the client, I Googled the name of the financial advisor who was promoting the annuity. The first thing that came up was a complaint filed by the Utah Insurance Department against the advisor. The plaintiff was discovered to have a recording of the advisor saying things like “there is no risk” with an investment, which the State found to be illegal and deceptive.