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A case of disgraceful bank conduct |
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At the outset of this document, I wish to make it clear that the views in it are mine and do not reflect in any way policies or opinions of To The Center.
That said, I wish to discuss recent financial misdeeds that my sister in law and her husband have suffered at the hands of Chase Bank. As many of you are aware, banks were given authority to provide investment advice and services a number of years ago. Many of them became aggressive in this area and specifically targeted senior citizens and persons with little or no knowledge about investing. Who better to trust in such matters than your banker?
Unfortunately, many bankers have no knowledge about investment risk and risk management so gave poor advice. Worse, many apparently found this an opportunity to fleece persons with no knowledge. My sister in law and husband are such victims.
They went to the local Chase office asking for advice on what to do with their IRA investments and some CDs. They were both in their 70s at the time. Their request was to put the money into something with absolute minimal risk to the principle. He worked in labor all his life with income above, but not by much minimum wage level. Despite low income, they accumulated a fair nest egg. Neither of them drink, smoke, or engage in other costly pastimes. They had a garden all their life that provided nutritious and inexpensive food. They paid off their mortgage and never owned a credit card. Because of their life style, they had somewhere in the area of $150,000 total savings.
The “advice” that the person at Chase provided them was to buy a number of separate annuities. These were purchased with the principle realized when a CD matured. Most of them were “death benefit” types. None of the annuities sold to them were “income annuities”. Death benefit annuities are bad investments for senior citizens because of their cost for the sales commission and lack of liquidity. In this case, by selling multiple different annuities, Chase garnered numerous sales commissions. Each time a CD matured, the Chase representative had them buy another annuity rather than put the money into a new CD or other principle safe vehicle. Rather than providing them income, the death (twenty years to maturity for a 75 year old cannot be thought of except as a death benefit annuity) benefit annuities are “growing” at 2% a year for their beneficiaries. The other annuities have significant early payout penalties amounting to ten or more percent above the already exorbitant sales commissions. Of course, the bank also charges an annual maintenance fee.
They asked us several months ago what we thought of these “investments”. We were appalled. I advised them that I believe what has been done is fraud and may be criminal misconduct. Since they are very religious and the sales lady at Chase was careful to always talk in religious terminology, they have dragged their feet at doing anything, Last week, we finally convinced them to move some of their savings to another bank and to show the annuity paperwork to that bank. That bank has indicated that they plan to file a complaint with the state banking agencies. One of the advisors mentioned that much of what he does is to repair investments made with the Chase office but that this is the worst case he has yet encountered.
So why am I writing all of this? First, to publish the name of Chase bank, one of the larger in the US as a bank that appears to engage in what is either investment malpractice or fraud. When asked to preserve principle, there are really only a few reasonable recommendations such as T Bonds, CDs, etc.
Annuities, in my research, are rarely if ever recommended for seniors and the type annuities sold here would probably never be right for seniors. In addition, if one buys annuities for some reason, one would not buy multiple small ones because of the recurring maximum sales commissions. Of course, it is entirely possible that the investment advisor's only income is the commissions she receives from these despicable advisories.
Second is to remind those of you who are 70 ½ that IRA withdrawals are mandatory (although, this year, Congress gave a bye on the mandatory withdrawals for this year only). It appears that the bank has not made the withdrawals nor reminded them to take them. As a result, they may lose up to fifty percent of their IRAs due to Chase's incompetence.
Third is to wonder who if anyone is out there to provide some sort of protection for the naifs in our society who go to so called investment counselors and banks in order to learn what to do with their hard earned money. There are huge numbers of persons such as my sister in law and her husband who live frugally only to have their money fleeced by these scoundrels.
Those of you who read ToTheCenter regularly know that I am Libertarian and that I believe in Capitalism as the most efficient means of creating wealth for all citizens. However, I also believe that we engage in and “hire” governments in order to protect us from unethical taking whether by armed robbery or by fraud such as Bernie Madoff and, apparently, Chase Bank. I must say that I am unimpressed with our government's actions in finding, documenting, and punishing such misconduct. It cannot be difficult to recognize symptoms of such activities. Documenting may be more difficult but not impossible.
After the past year and now with this episode, I find that I have minimal trust in banks and bankers. There are honest ones out there, some of which are large and some small. I believe they are now with an honest bank but face difficult times in righting the wrong. We bank with a large bank that appears honest and careful to me. However, even though I trust them, I check everything and NEVER ask a banker for investment advice. I ask them about loans, savings, checking, etc.
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