Fran Tarkenton

Equity indexed annuities – Fran Tarkenton loves them

January 31, 2019

Fran Tarkenton loves equity indexed annuities. That does not mean you should. Tarkenton is 79 years old and encouraging elders to purchase equity indexed annuities (also called fixed indexed annuities) as a way to protect themselves from elder financial abuse. That’s right. Fran Tarkenton is encouraging elders to purchase these high fee, non-liquid insurance products instead of investing in low fee, highly liquid investments like broadly diversified stock and bond index funds. Tarkenton has even written a book touting equity indexed annuities as the answer to protecting seniors from financial abuse by family members. Here it is: Tarkenton has good reason to love equity indexed annuities — he sells them. They are good for him because they generate substantial commissions and fees for him. If you read this article http://bit.ly/2UrH4L2, you will learn that Tarkenton owns some of these annuity products, but also lots of stocks. While family members do engage in elder financial abuse, so do financial advisors and insurance salesmen. Selling unsuitable equity indexed annuities to elders often is elder financial abuse because of their high fees and lack of liquidity. These annuities often have surrender periods of over 10 years. What happens when the elder investor needs money for medical expenses or long term care? The investor is out of luck – that’s what happens. Why do agents sell them to unsuspecting elders? Because the agent can earn an upfront commission from the insurance company of as much as 10%. A commission that is not disclosed to the purchaser. Purchasers of equity indexed annuities are not protected by law the same way that purchasers of mutual funds, stocks, bonds, and even variable annuities are. That is because the powerful insurance industry convinced Congress that equity indexed annuities are insurance products — not securities — even when folks hawking them are obviously selling them as investments. If those annuities are not part of an overall investment plan, you might not be able to recover damages in FINRA arbitration. I address the problems of annuities for retirees in another post that you can find here: https://secdefenseattorney.com/blog/2018/01/10/retired-considering-annuities-wait/ Getting back to Tarkenton, here is another reason he might prefer to sell annuities, rather than securities products. Twenty years ago, Tarkenton settled SEC charges of engaging in a fraudulent scheme to inflate his company’s earnings. https://www.sec.gov/litigation/litreleases/lr16306.htm In its complaint, the SEC charged the following: “Tarkenton, Addington, Gossett, Fontaine, Hammersla, Alvarez and Welch engaged in a fraudulent scheme to inflate KnowledgeWare’s financial results to meet sales and earnings projections. In all, KnowledgeWare reported at least $8 million in revenue from sham software sales. KnowledgeWare “parked” inventory with software resellers and other supposed customers that were given the right not to pay for the software, either orally or in “side letters” that were kept separate from the other sales documents. As a result of this scheme, KnowledgeWare falsely reported record sales revenue and dramatic increases in earnings in press releases and in quarterly reports filed with the Commission and disseminated to the public in 1993 and 1994 (“Quarterly Reports”).” “Even when KnowledgeWare later restated those quarterly results, KnowledgeWare continued to mislead the investing public by […]

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More choice is not always better

January 14, 2019

According to traditional economics, having more choice is better than having less choice. But that is often not the case in the real world. Behavioral economics professor and Nobel Laureate Richard Thaler shows us that sometimes we are better off when we limit our choices.

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Preventing Elder Financial Abuse Program

December 26, 2018

As many of you know, preventing elder financial abuse is a topic that is near and dear to my heart. I am delighted to invite you to a program on January 21, 2019 in Chicago on what financial advisors, CPAs, tax preparation professionals, attorneys, and others who work with elders should know about how to protect clients from elder financial abuse. Not only is elder financial abuse devastating to the financial well-being of aging baby boomers, but research shows that it can lead to an early death. But how can we do this without alienating clients?  We will discuss relationship-enhancing  ways to make preventing elder financial abuse an integral part of your practice.

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old fashioned radio

Our past experiences affect our current investments

November 15, 2018

As human beings, we are influenced by all our past experiences. That means that our past experiences affect our current investments and other decisions. If your earliest investment experiences were during the 1970s — when interest rates were approaching 20% — you will forever think about investments differently than if your earliest investment experiences were during the dot.com bubble. This is why the research of behavioral economists like Nobelist Richard Thaler is so important for investors.

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Grim reaper

Collateralized debt obligations are back – that is scary!

October 26, 2018

Collateralized debt obligations rise from the dead A frightening Halloween development – the rise from the dead of collateralized debt obligations ( CDOs). These little darlings nearly brought down the entire financial system in 2008. But the fees that CDOs generate are just too attractive for financial firms to pass them up. And even if they blew up and contributed to the Great Recession, nobody went to jail.

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smartphone and investment decisions

Smartphone – bad investment decisions

October 24, 2018

Investment decisions based on smartphone research We think that using our smartphones to do research — including research for investment decisions — is a good thing. After all, how could using this tool to access more information be bad?   It turns out smartphones and investing go together like peanut butter and tuna fish. Two things that are just fine on their own but should not be combined.

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Regrets of creator of collateralized mortgage obligation

September 7, 2018

Lew Ranieri regrets creating the CMO “‘I’m the guy who played a central role in this home thing and I regret it because…it got abused beyond everybody’s imagination, ‘” says Lewis Ranieri, creator of the collateralized mortgage obligation (CMO), according to the Wall Street Journal. Ranieri’s creation of the CMO was nifty financial engineering by a sophisticated Wall Street investment banker that revolutionized the home mortgage market. But the CMO ended up being a financial weapon of mass destruction that crashed the global economy in 2008. The CMO brought us the Great Recession, from which we are still recovering.

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orangutan

Our brains cause us to make bad investment decisions

August 24, 2018

We invest like Dr. McCoy, not like Mr. Spock. As investors, we make bad investment decisions because we are emotional, distractible, impatient, and inconsistent. But that is not our fault. There are things that developed in our primitive brains that do not help us when we have to make decisions about complex matters like investments. Knowing how our brains are hard-wired can help us to avoid the tragic mistakes that we so often make in investing.

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gate with private sign

Private placements – great for broker, not so much for investor

June 25, 2018

Private Placements – what are they? Private placements can be stocks, limited partnership interests, or other securities issued by companies that are not publicly traded. Private placements can be investments in things like a single apartment complex, a single oil well, a basket of properties or oil wells, or a biotech company. The companies issuing these securities do not have to comply with many federal securities laws such as publicly filing their quarterly and annual financial statements. They are not required to provide ongoing disclosures to investors like public companies are. You cannot sell these securities on exchanges like the NASDAQ or NYSE when you need money.

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SEC seal

Regulation Best Interest is really Regulation Status Quo

April 24, 2018

Regulation Best Interest ? Under the SEC’s proposed Regulation Best Interest, the SEC says a broker-dealer would be required to act in the best interests of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer. This is the SEC’s plan to displace the Department of Labor’s uniform fiduciary standard for retirement accounts which was adopted after YEARS of analysis.

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