Thursday, October 15, 2009

Shady Planning

There was a scary story yesterday out of Ohio, where two estate planning companies were forced to pay a fine of $6.4 million after providing fraudulent financial services to more than 3,800 people. The scheme worked like this: Older Ohioans were subjected to high-pressure, in-home presentations where they were told that buying living trusts would save them a lot of money over a traditional will.

The cost for this living trust: $1,995, even though it came from the company that was doing the presentations and was a canned living trust agreement drawn up by people in California who weren't even lawyers. And once a consumer had signed up for the living trust, the companies had sales agents descend on them trying to push deferred annuities. The Better Business Bureau had expelled these companies in Pennsylvania back in 2006, and a North Carolina judge had ordered them out of that state as well.

Sales representatives for financial products are always required to identify themselves as such and not claim to be estate planners or financial advisers. This kind of thing is related to what we were talking about last week with regards to the advantages of hiring a fee-only adviser (as I am): When you're making any sort of key decision about your financial future, make sure the person giving you recommendations has your best interests at heart. There are 3800 people in Ohio who could have used that advice.

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