DennisBeaverApril 30, 2011 (Original publish date) • By Dennis Beaver

Last time we began our story about customers of a major bank who wound up in the hands of either a crooked or incompetent investment advisor who misled them, causing a loss of $2,000.

They heard the same friendly question bank employees all over the country, from tellers to personal bankers, ask customers who have nice, secure, FDIC-insured accounts earning virtually no interest: “Would you like a better return on your money?”

Some customers will reply, “Thanks, but no thanks,” possibly having an adequate pension and not needing to worry that much about a little more return, or maybe being suspicious of what might happen if they say yes.

Our trusting couple said yes. They were referred to David, “And, with his title of certified financial planner and bank vice president, we thought this meant he was both in management and a stockbroker with a higher degree of knowledge and competence,” the retired high school teacher explained.

Nick was going to be in for one costly surprise.

No stranger to misleading a customer

Nick and his wife Marva were savers and had over $400,000 in a portfolio management account.

A nice, fat, juicy insured account can cause bank employees – from tellers, managers and stockbrokers – to begin rubbing their hands and drooling. Properly placed into a non-insured investment, thousands of dollars in commissions for the bank and stockbroker are generated, all nicely paid by the customer.

“Often, completely inappropriate investments are sold to the elderly, such as annuities which lock them into outrageous early termination charges, poor returns and potentially huge losses of money they need to live off of. So often alone, with no one there to tell them to just wait, and not understanding what they are getting into, they become victims,” according to a broker with another bank.

But Nick and Marva were not sold an annuity. They were sold $200,000 positions ($100,000 each) in two separate mutual funds. During three separate meetings with David, they were assured there was no early withdrawal fee or penalty if, for whatever reason and no matter when, they wanted to just pull the plug and sell.

“Nothing in and nothing out,” David repeated. One of the mutual funds was as he represented – no surrender charge. But the other had a $2,000 hit, “which he easily could have determined, should have known about and had a legal duty to know,” according to both a legal expert and stockbrokers interviewed for this story.

Public records reveal that David was no stranger to telling a client, “There is no surrender charge.” At the same time he was dealing with Nick and Marva, he was facing a FINRA complaint from another customer of the bank for the same thing: “No mention of any withdrawal penalty to close the account.”

Let’s just blame our customer

David, his supervisor and other bank staff confirmed the misrepresentations and gave initial assurances to the couple that the situation would be remedied. You and the Law also confirmed those statements and the specific admission from David of his error.

But then, backpedaling on an amazing level began, with the matter referred to the bank’s legal department in St. Louis and specifically to Chris, a non-attorney bank employee who Nick described as “uncaring, not dealing with the facts, and blaming the customer.” We also spoke with him and can’t disagree with a thing Nick stated. Chris also promised to have one of their attorneys call us back. We are still waiting.

The bank owes this couple a refund, but the larger story is for anyone who so much as thinks they can trust financial advisors who might work in their bank. Trust is not the word. While they have a duty to be honest and hopefully competent, legally they are not in a position of trust with you. They are selling a product and after a commission which you will pay for.

Don’t be a sucker

“Do not think that, merely because you know everyone in the bank or credit union, that anyone is watching out for you. Interview several financial advisors, listen, look, and try to get a feel for that person’s honesty and knowledge. Ask your friends who they use and who they would stay away from. Don’t be in a hurry to select anyone,” stated the broker with the other bank.

We happened to be in David’s town recently, and dropped into one of the offending bank’s branches. Seated at the financial advisor’s desk was an elegant, elderly couple, clearly in their late 70’s or 80’s, talking with a handsome, and ever so confident, smooth-talking advisor.

We clearly saw the elderly customer mouth the word “annuity.”

Walking to that desk, we asked for the financial adviser’s card, which he handed us with such a sincere smile. It was David.

Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.