DennisBeaverJuly 26, 2014   •  By Dennis Beaver

Listen to Satellite Radio, watch TV, or surf the net looking for investment articles, and it is impossible to miss, “When the market goes up, our clients go up with it, and when it goes down, they are protected from loss.”

Hanford physician, Dr. X heard those ads, and called the “800″ number. “Initially, I wondered how it is possible to somehow be in the stock market yet not exposed to loss if the market should do a repeat performance of 2008.”

But our reader was about to do more than simply wonder, as he came close to putting $800,000 of his IRA at significant risk of loss when his wife remembered that we had earlier addressed this very issue and suggested that he contact us.

Two prominent advertisers are spending millions of dollars–using the old standbys of persuasion, fear and greed. Ty J. Young Wealth Management and Brent Kitchen, Safe Money Millionaire—promising financial security, risk-free growth and safety through the use of extremely complex life insurance policies and annuities which generate substantial commissions for their “advisers,” and can lock up your money for years.

Their target audience are folks planning to retire or already in retirement, afraid of “the stock market roller-coaster, outliving their finances, tired of an almost zero return on their CD’s or other savings,” as their ads state.

For some people, annuities can be a sound, long-term investment. That said, determining if an annuity is right for you requires a careful financial analysis conducted by a fee only financial planner who acts as your fiduciary, putting your interests first.

Some of these “advisors” haven’t a clue of what they are talking about. For example, one from the Safe Money Millionaire group told You and the Law:

“In the history of the world, there has never been an annuity or a death benefit claim that has not been paid in full, and besides, there are State Guarantee Associations which bail out a company in trouble.”

“Anytime you hear something like that,” New York attorney Edward Stone suggests, “Just say these two words: Executive Life. Have you heard of this company, its epic collapse and the policyholders who lost huge amounts of money in their annuities?”

In fact, we mentioned Executive Life and the Texas-based adviser blew us off. “Oh, they sold structured settlements, that’s different.” When we told him that he was absolutely wrong, days later, he mailed a hand-written note which read: “I’m sorry I was wrong, you were right.”

Stone is one of a handful of attorneys in the country who knows only too well what can happen when a life insurance company fails. If you want to read some very sad personal stories–over 900 million dollars lost— Google: Cautionary tale about annuities. Or, go to and click on the ELNY tab.

“While there are State Guarantee Associations which offer some protection,” Stone observes, “Coverage amounts vary from state to state and range from $100,000 to $500,000 per individual per lifetime.

“This means that if the doctor put his $800,000 IRA into an annuity, and that company bit the dust, he could face significant disruptions and reductions in his benefit payments.”

Instead of putting all of your eggs in one basket, Stone recommends “looking at highly-rated mutual companies. They don’t manage assets for earnings reports. By purchasing policies from several companies, this spreads your risk and helps address the looming uncertainty in today’s insurance market,” he underscores.

“After the stock market crash in 2008, the sale of annuities skyrocketed, as people lost money and wanted a secure life-time income. But after years of near zero interest rates, insurance companies are not offering great payouts and they may be tempted to take greater risks with your money to meet payment obligations.

“Some of the largest auto-makers and telecommunications companies in America are de-risking their pension obligations, by handing a lump sum of money to a large insurance company which in turn issues a group annuity contract to fund pension liabilities.

“So, now, we have what is known as concentration risk–an enormous obligation of one or two insurance companies to do what private industry was earlier responsible for.

“Once de-risked, investments are not disclosed, fiduciary standards no longer apply and non-uniform state laws replace ERISA and the uniform safety net provided by the Pension Benefit Guaranty Corporation to employees who receive company provided pensions.

Stone sees “A perfect storm brewing right now, as millions of workers retire and plow their hard earned retirement income into annuities out of fear of another financial crisis while corporate America de-risks.”

If anyone thinks these great insurers are too big to fail, Mr. Stone has a nice bridge for sale in Brooklyn.

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