Here is a scenario that may or may not sound familiar to you: A financial advisor meets with an elderly client (maybe your mother or father or some other elderly person you care about) and encourages that client to exchange their fixed annuity for a variable annuity. Then, some years later, that same financial advisor, persuades their client to annuitize the policy, thereby causing the client to lose a substantial amount of money. This type of act is a violation of fiduciary duty and California’s elder abuse statue, which makes it illegal to wrongfully obtain and use an elder’s property. Under California’s Elder Abuse and Dependent Adult Civil Protection act, it is stated that “financial abuse” occurs when a person or entity “takes, appropriates, or retains real or personal property of an elder or dependent adult to a wrongful use or with intent to defraud, or both.” “Wrongful use” occurs when any of the above mentioned actions is taken “in bad faith.” “Bad Faith” is shown when a person or entity should have known that the elder or dependent adult had the right to have the property transferred or made readily available to the elder or dependent adult or to his or her representative. Basically, bottom line is, an elder abuse claim is warranted when a financial advisor does not inquire enough about their client to determine that an exchange of an existing fixed annuity for a variable annuity is in their best interest.
These ‘unsavory’ marketing practices by insurers or other deceptive practices in connection with the sale of annuities to senior citizens are a common type of elder abuse. The following are some “red flag ” type situations to consider if an elderly person you care about is going to meet with or has already met with a financial advisor regarding annuities:
• Sometimes the damages arising from rolling over a fixed annuity into a variable annuity, rather than liquidating the annuity can often be substantial.
• Elderly clients can be exposed to excessive risk of loss of principal at the time of annuity reinvestment.
• As a result of annuitization, tax considerations may not have been adequately considered and the client can incur substantial income taxes on the annuity payments.
• An elderly person can be persuaded into purchasing annuities that subject them to early withdrawal penalties, fees, and arbitrarily-capped interest rates.
When a financial advisor wrongfully takes the property of a senior client to facilitate deferred annuity sales for financial gain to the detriment of the senior, it is considered sufficient grounds for an elder abuse claim. With that said, proving loss can be tricky, as a financial advisor may deny wrongdoing by claiming that the investments recommended had no value, which misses the point. Usually a claim of wrongdoing has more to do with the needs of a client-that the investments made were less valuable than other, more suitable, investments. In this type of scenario, a plaintiff attempting to prove such loss may be granted some leeway in court, but not always. If any of the above sounds familiar or if you feel you or someone you love may have been victim of unsavory business practices at the hands of a financial advisor, please contact The Brod Law Firm at: (415) 397-1130.