Beware of Sharks annuity

 

Monday, Mar 23,2009, 11:54:59 PM   Click:

Copyright: The Columbus Dispatch, Ohio
Source: Columbus Dispatch (Ohio)
Wordcount: 971


Tue 21 - Mildred McCreanor suffered from dementia, was partially blind from diabetes and had recently moved into a nursing home in Miami County, near his home.

The last thing the 83 year-old woman should have done with his life savings in cash was in his pension to buy a new one, said the lawyer representing her estate.

"This is a perfect example of why these products are horrible and inappropriate for an elderly person and in poor health," said Columbus attorney David Meyer.

An arbitration panel of the Financial Industry Regulatory Authority McCreanor facing succession by a 2-1 vote on March 13 and ordered Huntington Investment Co. to pay $ 110,000 in compensatory damages.

The investment company is a subsidiary of Columbus-based Huntington Bancshares.

"I was very pleased and relieved" by the panel's decision, said Jack Hershey, 71 and the oldest of five children McCreanor.

He had the power of his mother and signed on the annuity at the beginning of 2006, believing it was a good investment.

McCreanor died two weeks later, Hershey and says that he and his brothers and sisters received half of what they thought they should hear from Huntington annuity.

"While Huntington Investment Company has disputed the claim and be disappointed by the decision, we will fully respect the FINRA arbitration of 2 to 1 split decision in this matter," spokeswoman Jeri Grier of Huntington said in a statement. She declined to comment on the details of the case.

The Ohio Department of Insurance to investigate the matter, including Nicolas Bobb, the broker who sold the annuity McCreanor. "We will contact Huntington for more information and will be opening a file on the situation," spokesman for the ministry said Carly Glick.

Bobb, who now works for NatCity Investments in Columbus, declined to comment.

If Huntington is not the first to associate a familiar name in the financial Ohio. In January 2008, the Financial Industry Regulatory Authority fined Banc One Securities Corp. of Chicago $ 225,000 for "deferred making unsuitable variable annuity sales to 23 clients and issues linked to this. The authority said 21 of 23 customers are more 70.

This case involved transactions between 1 January 2004 and 30 June 2005. Banc One Securities did not admit or deny the charges, the authority said in a statement last year. Banc One merger with JP Morgan Securities Inc. Securities in 2006.

Older people are often considered as marks for identity theft, financial fraud and outright financial products that are legal, but not in their best interests.

"Unfortunately, seniors are attractive targets for scams," said Karla Warren, spokesman for the Ohio Department of Aging.

The Ohio Department of Insurance, Division of Consumer Services received 414 complaints from consumers about the different between 1 January 2007 and March 17 of this year. The appeals suitability, misrepresentation and agent, and also for general inquiries.

Annuities are legitimate and legal investment provide retirement income and, often, a death benefit for beneficiaries.

Fixed rate annuities offer guaranteed payments, often on a monthly basis, while annuity payments at variable rates are based on the performance of a portfolio of securities.

Equity-index annuities are a combination of fixed and variable annuities are very complex and difficult to compare, "said John Gannon, Senior Vice President for Investor Relations in the Financial Industry Regulatory Authority .

Many experts warn seniors to think carefully before investing in an annuity, and the Ohio Department of Insurance warns seniors to avoid "predatory sales practices."

"The problem with annuities is it is quite possible the high will not live long enough to see a personal gain," said Glick. "And we hear from churning, which is when agents encourage seniors to replace an old with a pension annuity.

Churning, she says, generates costs to sell and profit commissions for brokers.

In the case of McCreanor, Meyer said his son was informed of the money in the annuity of his mother, which led to a $ 6,000 fee.

Hershey sold 212,000 dollars in immediate fixed annuity paid $ 1500 per month, this income is to be used for his mother from the nursing home and medical, "said Marnie Lambert, one of the lawyers of the estate .

In an immediate annuity, the buyer pays a lump sum for pension and receives regular payments immediately.

"She should have lived a long time for this (type of annuity) to make sense," said Lambert.


Hershey Bobb said that he said this is the best way to go, and I thought he knew more than me on the subject, and I let him carry the ball. "

McCreanor received a monthly payment of $ 1,500 before his death.

Hershey said he was led to believe the board paid a death benefit to the estate of his mother, the total amount: $ 212,000. But she paid only $ 106,000.

"I was really shocked and upset," he said. "I felt like I had let my brothers and sisters."

The arbitration panel, in its award resolution, did not say why it ruled in favor of the estate of McCreanor. The lack of explanation is the standard procedure.

Summarizing the argument presented by the prosecutor of Huntington's disease, the panel wrote that the defense said the bank "reasonably based on the assertions of the complainant, she realized that she was making investments, and Hershey and McCreanor "ratified any investment recommendations."

This is not enough, "said Meyer. "The law says they have a fiduciary duty to represent what is in the best interest of the client," he said.

Seniors should beware of several things at the time of exchange of an annuity for another, "said Gannon. The list includes the costs of sale and transfer and the increase in fees and expenses.

"And the person that the exchange of products is paid a commission, and people should be aware of this conflict of interest," said Gannon.

The commissions are higher on the variable rate annuity, he added. "So, guess which ones could push a broker? he says.

swartenberg@dispatch.com



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