Connect with us


Dirty Dealings: Advisor Takes Advantage of Long Time Client’s Widow


Screen Shot 2015-04-21 at 11.35.55 AM.png

Imagine this scenario.  The person making all financial decisions was the man of the house.  His somewhat timid wife, married to him for many years, never wanted the responsibility to decide how to invest. They had a multimillion dollar estate. Then Harry, her husband died and she was totally unprepared.

That’s “Rosanna’s” story.  

Rosanna was married for decades to Harry who passed away at age 85. She was 82 at the time.  They had three adult daughters and one son, Jackson. Their son was never a steady job holder and had fantasies of how he was going to be a business owner. After his father died, he saw an opportunity.  He could easily manipulate his mother, who looked to him to essentially take Harry’s place with decisions about investments. Rosanna had begun to suffer serious memory problems and couldn’t remember a conversation from morning to evening. She was clearly a person with diminished capacity

Jackson was a co-trustee on the parents’ trust with his mother and sisters, but had sole power to make investment decisions. He conspired with the long time broker-dealer who used to work with his father.  The broker also saw an opportunity.  The broker told Jackson that he could help him out but Jackson needed to put a lot more of Rosanna’s money into variable annuities. What this meant was that her money would be tied up for years, unless she paid a stiff surrender charge to get to it.  A full 87% of Rosanna’s money was then shifted into variable annuities. When Harry died, the amount invested in annuities was about 40%, which was plenty. This shift of most assets into annuities of course generated a huge commission for the broker.  About the same time, Jackson took a six-figure loan from Rosanna’s trust without consulting his sisters and without informing them.

They were angry and upset with Jackson for manipulating their mother, for taking out a “loan” from their mother’s trust, which he didn’t pay back and for sneaking around behind their backs putting so much into variable annuities. That was going to affect their inheritance.  When the sisters called me, we discussed the issue of manipulation of their mother. No one had ever checked her out for her capacity for financial decisions. When her daughters wanted her to see a doctor to find out more about her memory troubles, Jackson vetoed it.  Rosanna consulted Jackson on everything.   This meant that legal action was necessary.  I referred them to an elder abuse attorney to take up the cause.  They were very distressed and not speaking to Jackson. Meanwhile, Jackson again manipulated his mother to get money from her, with which he hired an attorney to harass and threaten the sisters.  It was ugly.

No one can be sure how this nasty tale will play out, but the regulators will probably not like the fact that the broker put so much of an 85 year old’s assets into variable annuities.  They will probably not like that he had to override his firm’s internal controls set up to prevent that.  They will probably not like the fact that the net result is that the estate lost a significant sum compared with what it would have done in conventional investments suitable for an 85 year old.  I sent the sisters the forms to file complaints with both FINRA and the SEC.  They will also have an attorney to represent them in that matter.

And as for Jackson, I hope that the courts will deal with him justly.  He is looking out for himself, that is clear.  As a trustee, he had a legal duty to the trust, not to his own self interest in grabbing a six figure “loan” from the trust that he had no means to repay.

The takeaway here is that your aging clients, particularly the very unsophisticated ones like Rosanna are sitting ducks for abuse by unscrupulous brokers. And it is up the the advisors who are ethical to blow the whistle.  It is up to everyone to seek justice for the unwary who become victims of manipulation because of greed, the ease of taking advantage of an elder, and the attitude that “it’s not my problem, she’s not my client”.  Please make it your business.  At, we want to put a stop to this kind of abuse.  We urge you to join us!

Continue Reading