Elder Annuity Fraud: The Scam that Won’t Go Away

I apologize in advance for being a Derrick Downer (not “Debbie” as I’m a dude), but unfortunately I’m here again to bring down the party and tell you about a disturbing resurgence of an old scam.  What is it you ask?  I know that the plethora of available possibilities is endless, but this trend seems to showcase the return of the elder annuity scam.

Now, I know many of you out there may be brimming with questions like: “What’s an elder annuity scam?”  “How do you know it’s returning?”   “Was it really a problem before?”  First off, slow down there Ke-mo sah-bee – those are a lot of questions!  We’ll get to each of them and more in due time.  But let’s start with the second question.

I was looking through LegalMatch’s client intake statistics the other day and noticed that an unusually large number of people were seeking attorneys to assist them with deceptive financial investment practice problems.  That is, stock brokers and investment advisers who give misleading financial information to their clients for their own personal gain.

That discovery alone probably doesn’t seem like anything very shocking, considering what’s been going on lately with financial advisors.  But as I began to read some of the descriptions these clients wrote about legal problems, I noticed that many of the clients were over 65 years old and claimed to have no liquid assets available to them because all of their money was tied up in an untouchable account.   If I was in a crime drama, that’d be the point where the ominous music would kick in and I’d stare into the camera with my eyebrows clenched.

What all these clients were describing, as I soon learned, was that they were each victims of an annuity scam.  An annuity scam involves a financial advisor or agent selling a long term insurance annuity to a client who doesn’t need it.  The advisor generally promises to the client that they’ll receive a series of profitable monthly payouts from their investment if they put a large amount of money into the annuity.  The advisor will usually try to get the person to invest as much money as possible, because the advisor is normally paid a percentage commission from their employer based on the amount of the client’s investment.  The twist is that clients are sometimes not told that once they invest their money, they won’t be able to withdraw it from the annuity until it matures.  The maturity period can be anywhere from 8 to 20 years.  And if they do try to withdraw early, the client will have to pay a large financial penalty percentage for each withdrawal.

However, this isn’t to say that annuities themselves are scams.  Far from it; actual annuities are legitimate securities that can be a very profitable long-term investment option for the right person.  Annuities are like CD accounts, where a person’s investment is also locked for a specific duration of time, and works in the same way.  But instead of being offered by banks, annuities come from insurance companies.

The problem is that for many investment agents, annuities can be a hard sell (especially to knowledgeable investors) because most people have bills and other expenses, and can’t afford to have their savings tied up in an untouchable account.  Plus in order for these same agents to make a decent living off those who do choose to buy or invest in an annuity, the investor has to put in a lot of money for the agent to make a good commission.

So what’s an agent to do?  Why, target senior citizens who have limited investment knowledge and are easily scared by worst case scenario stories.  And that’s exactly what these types of scummy agents do.  And it seems that in this tough economic climate, more and more are jumping onto the band wagon.

So what can you do if you or your loved one is a victim?  Once again, this is a complicated answer.

You have a number of options.  The first is that you can contact the agent who sold you the annuity and demand your money back without penalty by claiming that you weren’t told or didn’t understand the terms of the annuity plan.  You can also go over the agent’s head and contact his company’s headquarters instead.  This stuff happens enough that all of these places have entire department dedicated to investigating these types of allegations.  You’ll usually be able to get your money back this way, but the problem is that you’ll generally have to sign a release that waives your right to sue them.

But what do you do if you suffered additional financial loss and emotional pain on top of and as a result of having your money tied up?  Well, you find a lawyer who can file a lawsuit that lists the financial and emotional damage you suffered.  There are both federal and state laws that specifically prohibit this form of securities fraud.  Furthermore, many states also have both civil and criminal laws that enhance the penalties of defendants who commit this sort of fraud on victims who are senior citizens – that is over the age of 65.

See?  Despite all the shenanigans going on in that last administration, the government still has a lot of safeguards in place to ensure the more vulnerable citizens in our country aren’t taken advantage of by con artist.  My, how far we’ve come.

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2 Responses to “Elder Annuity Fraud: The Scam that Won’t Go Away”


  1. 1 Dan

    I have to say this so called “annuity scam” you refer to just happens to end with a “sue them” statement. What do they say about lawyers? When don’t you trust what a lawyer tells you? When their lips are moving! I sit with 3-5 clients a day in my insurance office. These are folks from 50-100 years old, yes, I said 100 years old. 90% of my clients are looking to park their money indefinitely or like to skim the interest from the account for supplemental income. Their goal is to leave as much money for our children or grand children as possible. In fact, I sometimes wonder why I contribute to my SEP account each year, because all of the retirees I sit with, only take the RMD’s from their accounts and then turn around and re-invest it, they don’t need it. They lead simple lives and are mostly concerned about what they are leaving their heirs. I can’t speak for other aqents, however, I do know that I feel good at the end of the day when I can pay my client $4,500 bucks a year on a 100K and in 10 years they still have that same 100K and have taken $45K interest off the account to supplement their daily expenses. What you fail to mention is that annuity accounts give you access to their money, they can take from 10-20% without penalty each and every year and that is something I cover in writing with my clients. I tell them if they need this money in the next few years, this isn’t the place for them. Most of these folks have been flipping this money into different CD’s over the years and is just as tied up in a CD, I don’t hear any griping going on about the banks. We all earn a living, if there is folks out there doing it dishonestly, do you think this is the only business that has dishonest people in it. What about Lawyers? What about car salesman? Every aspect in our lives we deal with dishonest people, that is why you do your research and use business that have good reviews and have no complaints with the Better Business Bureau in their city. You write a very ONE-SIDED article here my friend, take the blinders off please. Thank you…

  2. 2 Andrew Dat

    As I mentioned in the article, annuity plans in and of themselves aren’t scams. However, generally investment plans like these are better suited for those who have long term investment goals, such as younger people who have consistent income and more liquidity. Sure there are some elderly people who have the luxury of being able to park a lot of their cash in an annuity, but for many of them greater cash flow is better suited. Regardless, the article is more of a commentary about how less moral insurance salesman can take advantage of those in a weaker position. Happy to have your thoughts though.

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