New York Times has an article about a couple who were ripped off by their bank.
WHEN Elaine and Merlin Toffel, a retired couple in their 70s, needed help with their investments, they went to their local U.S. Bank branch. The tellers knew them by their first names. They were comfortable there.
So when a teller suggested that they meet with the bank’s investment brokers, the Toffels made an appointment. After discussions and an evaluation, the bank sold them variable annuities, in which they invested more than $650,000. The annuities promised to generate lifetime income payments.
“We wanted to make the most amount of interest we could so if we needed it to live on, we could use it,” said Ms. Toffel, 74, of Lindenhurst, Ill.
What she says they didn’t fully understand was that the variable annuities came with a hefty annual charge: about 4 percent of the amount invested. That’s more than $26,000, annually — enough to buy a new Honda sedan every year. What’s more, if they needed to tap the money right away, there would be a 7 percent surrender charge, or more than $45,000.
The article suggests that hiring financial advisors held to fiduciary standards will help. Maybe it can help avoid the worst of the excesses. But plenty of high-cost products designed to rip people off will pass the nebulous and subjective fiduciary standard. The only way you can really protect yourself is to become an educated consumer. When you need advice, look for a fee-only financial advisor who will accept hourly fees.
It's not illegal to offer bad financial products. It's your job as a consumer not buy them.
It's not illegal to offer bad financial products. It's your job as a consumer not buy them.