Skip to main content
This is unbelievable.  Here we are, always trying to alert people to financial abuse and we think Mikol’s own mom, Alice, has been taken advantage of by her financial advisor!
Alice is 91, is blessed with a great memory and pretty good health for a woman of her age.  She works at it.  She’s been a widow for 5 years now.  Dad always handled their finances.  Since she’s been on her own, she relies on Mikol, his sister, an accountant friend and a financial advisor to guide her about her investments.   She’s comfortable, but not wealthy by most measures. There is enough to take care of her, though full time care would eat up a lot of what she has.  Luckily at this time, she is able to remain independent.
Alice decided to change financial advisors because the guy she was using for advice made her nothing for a solid year while the stock market was doing well.  It was then that she learned, and we did, that her advisor had done something Alice is very upset about.  He had taken 10% of her investable assets and put them into a real estate investment trust (REIT) that could not be liquidated without a substantial financial penalty.  The money is tied up for 12 years. She is not a sophisticated investor and relies on others for advice and she relied on him a lot.   She says the advisor never explained that she would not be able to access the funds if she needed them unless she suffered a substantial loss. Plus that nice commission he took up front.  He, of course says he told her all about it and she agreed. She doesn’t believe him.   Mikol interviewed her about this and put it on YouTube. Here’s what Alice has to say.
State and Federal regulators are cracking down on investment advisors, brokers and dealers who sell senior citizens these non-traditional investments that lock up their money for years to come. In the July 14, 2013 InvestmentNews, Dan Jamieson reports that the Financial Industry Regulatory Authority and the state regulator in Massachusetts are prosecuting financial professionals who do just what Alice’s advisor did to her.  Mr. Jamieson reports that In February, Massachusetts settled a case against LPL, which agreed to pay at least $2 million in restitution and $500,000 in fines related to the sale of nontraded REITs. That’s what he sold Alice, a non-traded REIT.
Five high profile firms in MA settled their cases with the state regulators by agreeing to pay a total of $6.1 million in restitution to investors, and fines totaling $975,000.  Alice’s broker-dealer works with one of the organizations that was prosecuted and settled by paying fines.
The regulators are reported to have found out that in the REIT cases, people didn’t understand what they were investing in.  We think that is true for Alice.  We also think her advisor, knowing her lack of sophistication, took advantage of her for the sake of his commission.  She is ready to go after him. Mikol called him and questioned why he did this. His justification is that “she didn’t need the money” and that “she was investing for the benefit of her heirs”.  Mikol and his sister think that is rather arrogant of him.  How does he know whether she’ll live to be 100 and whether she will need the money?  Furthermore, Alice is not investing “for the benefit of her heirs” when she is relying on her funds to take care of her own needs for the rest of her life.  
We say, beware!  We did not know a professional advisor was taking advantage of Alice right under our noses. Talking to your aging parent about illiquid investments is important. They will lose a lot of their funds are locked up and a high price must be paid to recover them before the investment is scheduled to pay out.  Broker-dealers are selling these products with a substantial front end commission. It is not good for Alice, it’s not good for many others, and maybe your aging parents are among them.  Warn your aging parents not to be fooled by the promise of 7% returns.  They may not see the whole picture.  They are anxious to get good returns on their investments, but they may not realize they’ve been put in a position where they can’t get their money out of the investment when things change in their lives and they need the cash.
What can we do about this?  There is a way to report the advisor and his firm to the Financial Industry Regulatory Agency (Finra).  We hope that doing so will stop this kind of misguided judgment by advisors who prey on elders who don’t understand what they’re getting into.  Maybe he’ll make restitution and pay a fine, too.
Until next time,
Carolyn Rosenblatt

Leave a Reply