How Glenn Neasham lost his house, was forced to go on food stamps and faces jail time after selling a senior an indexed annuity
The case of this Lake County, Calif. insurance agent gives pause to advisors and agents dealing with seniors -- and indexed annuities
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RE: “If regulators want to ban indexed annuities or certain types of indexed annuities, like those with long surrender periods and huge penalties, they ought to consider doing so rather than punish agents when they sell them,”
I am the author of Financial Planning Fiduciary Standards under Dodd Frank 2012. It is the complement to two video courses on investments and annuities/insurance approved by the State Bar of California for Continuing Legal Education. It is not very nice to anyone in the business since most agents/brokers have never been taught the fundamentals of investing and more. Insurance is a minefield of exponentially increasing difficulty for agents and consumers.
I have taught long term care as part of California insurance continuing education for 6 years ending in early 2000, I would always comment specifically on the elements of Alzheimers, senile dementia, elderly competency (no matter any specific infirmity) how they act, what to do and on and on.
My point? Should Neasham have known about the issues impacting the elderly and requested an outside entity to review the purchase. Probably.
Should Allianz provided notice of the extra concern about dementia et al for seniors after the age of 65 or so. Problematic since not required by law, but as a huge firm, they had to know that in the early stages of dementia, seniors are very apt to appear to understand what is going on since they actually can APPEAR to be perfectly lucid.
Does the insurance department owe a duty to instruct/train agents on these issues. Absolutely since such issues have been well documented in research for about two decades.
So, should Neasham have known about what to to? Debatable. He looks to be about 50 or so and may not have ever confronted/learned about dementia. Very possible. Maybe he isn’t that bright. Maybe he is aliterate. So is the fault all his own?
Alliance had a duty to inform agents of the underlying issues- that the elderly are losing financial literacy at about the rate of 2% per year after age 65 (and they have, like all Americans, failed the literacy tests anyway) while at the same time INCREASING their perception of competency by 2% per year as well. They have to know that since it is common knowledge among the true professionals. Also that using a witness age 80 won’t count for much.
Does the California Department of Insurance owe a responsibility to agents regarding this knowledge. Yes
So here is the punch line. I sent my book to Hilda Solis of the Department of Labor in an effort to get them to ramp up knowledge for fiduciaries. In February this year, two DOL attorneys called me and said they enjoyed the book, blah, blah. I repeated that the effort to protect retirees et al has to start with professional instruction before a sale commenced. Their reply was, “we’ll just wait till the law suits start and that will send the message to the other agents”. What a farce.
I believe that this reflects the position of the bulk of regulators- they either don’t recognize their true responsibility or they don’t care. And I have spent years attempting to address this issue with the SEC, NASAA,, NAPFA, CFP, Insurance departments, AARP etc.only to be met with…..nothing. I have specifically worked with the California (and Florida) Department of Insurance only to have them refuse to enforce their laws. So this type of travesty/inequity is not necessarily unexpected.
I, obviously, do not know of all the underlying issues of this case. But I do know ethics, I do know responsibility, I do know fiduciary duty. Should Neasham have had his hand slapped- and hard- in order to send a message overall. Perhaps OK. A fine? OK. Lose his license? Not in view of the lack of effort by the firm and regulatory entities.
To blame him solely for what is an issue that the firms and regulators knew was a problem without informing and teaching the agent/student either initially or through mandatory continuing education is to recognize their own failings and shortcomings.
The legal system will have to sort this out but they must do so with the content above. Otherwise there is another sham on the publc
PhD MSFP MBA LLB BSCE
California Life and Disability Insurance Analyst
Registered Investment Adviser
Thank you for the thoughtful comment. You definitely added authoritative extra perspective.
Is there any chance somebody can reverse a lost license?
Thanks for your article which sheds much needed light on the current thinking of regulators regarding the decisions that retired Americans make with Their Own money.
The demise of defined benefit pension plans and the increasing awareness that Social Security may not be there to deliver the level of benefits that retirees were expecting or thought they were promised…means that it is incumbent upon individuals to make informed decisions…with one key thought in mind…Making absolutely certain that they do not run out of money before they run out of life.
Enter annuities. There is no other financial product on earth that guarantees what fixed and indexed annuities can do…and that is to guarantee an income for life (either by annuitization or under the Income Riders available on many products) without exposing the clients principal to risk.
And yet, an uninformed press typically turns to Wall Street brokerage firms while doing the research for articles they are preparing to write on fixed or indexed annuities (which is analagous to giving the fox the key to the hen house and expecting something different from the innevitable result). Just ask Kim O’Brien at NAFA…journalists continue to drink from the Wall Street fire hose despite the wealth of information made available to them by NAFA…a non-profit entity whose mission is to educate agents, journalists and the public about the benefits of these unique financial tools and the common misunderstanding and perceptions that too many Americans have about them.
Americans have a right to be concerned; not about annuities and how agents are compensated for the marketing expenses, time and effort they incur while educating their clients about them…but about a system that encourages people to expose their portfolios to risk during retirement because the products the street designs are always 100% marketable and liquid.
A rhetorical question…What’s the surrender penalty on any mutual fund or stock portfolio in America immediately following a 30-50% market collapse?
And another…What happens to any American dependent upon their portfolio for lifetime retirement income who is in what is often referred to as “the retirement red zone” (five years immediately before and after they retire) if the markets collapse during that critical time period? Do they drastically cut back their lifestyle and enjoyment of retirement and spend their days gambling and taking huge risks with their money trying to get back to even? Or do they turn their thoughts to prayer and ask their maker to take them before their money runs out?
Retirees dependent upon their portfolios to provide lifetime income they can not outlive should consider themselves fortunate to work with an advisor who understands and includes both fixed and indexed annuities in their tool chest…They will never be confronted with either of those undesireable choices…
Cherish the day,
Frank Laise, CLU
Is it possible to avoid this issue in the future by requiring that the insurance carrier who is underwriting the annuity pull medical records on the purchaser? If the senior in this case had been required to release her medical records the dementia woudl have been discovered and the insurer could have rejected the policy.
Paul J Cross
Great Article – very explict.
To join the Collaberation Forum and/or make a donation to the Glenn Neasham Appellate Trust Fund go to www.anbc.com
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Kelly O’ Mara may want to change the title of this article to support the statement that it is well researched…
Glenn helped his client purchase an indexed annuity. An indexed annuity is completely different from a Variable Annuity…which the title says he sold her…
Those readers that don’t understand the distinction would be well advised to visit www.nafa.com and click the education tab.
Cherish the day,
Frank Laise, CLU
Thanks for pointing out the difference between variable and indexed annuities. We’ve been going back and forth about how an indexed annuity was categorized, since part of the payout is fixed and part varies based on the index.
We went ahead and changed it in the headline. Thanks, hope people read up on the difference.
Indexed annuities are absolutely a version of fixed annuities. They are not a security product. And they are definately not a form of variable annuity. This was firmly established when SEC Rule 151A was defeated in 2009-2010.
One more point of clarification about these products; your statement that part of the PAYOUT is fixed and part varies based on the index conveys the thought that the income payout varies. Once triggered via an income rider, the monthly or annual income the client receives is not affected negatively by what happens thereafter to the measuring index. Interest credits are still made to the contract during the income payout phase. And in fact, the guaranteed annual lifetime income can increase in later years if a robust market results in higher than normal interest credits to the contract. But the only way the guaranteed income will go down is if the client’s circumstances dictate an emergency need for a lump sum cash withdrawal.
An example: Suppose a 70 year old has a current contract value of $ 200,000 and had triggered lifetime income at age 68 of $ 12,000 per year suddenly found themselves confronted by a family emergency requiring $ 50,000 and they had no other financial resources to meet that need. They would have a check delivered to them, in most cases, in less than a week from their insurance company. At the time of the withdrawal the $ 50,000 represented 25% of the owners contract value. Their insurance company simply would reduce their guaranteed annual lifetime income by that same 25%, in my example reducing the income from $ 12,000 to $ 9,000 per year…and it would remain at that level for life assuming no further lump sum withdrawals.
Summing it all up, here is what motivates people who truely understand indexed annuities to purchase them; principal protection from market loss, opportunity to enjoy annual interest crediting that may be 1-2% higher on average over time than fixed interest credits, the ability to know in advance (via an income rider) exactly how much income your account will generate commencing at a point in time of your own choosing…regardless of the interest credits made to your contract during that deferral period, and finally, gives the contract holder 100% control of the value of their account both before and after the decision is made to trigger lifetime income.
My example traces the many benefits of indexed annuities for those who intend or need to use them to generate lifetime income they cannot outlive. There are many other uses for indexed annuities. I encourage you and any readers here to visit www.nafa.com and click the education tab. You will learn exactly what indexed annuities are, where they fit, and why they can be a very important component of almost every retirees overall retirement income and or legacy planning.
But briefly, indexed annuities, like fixed annuities, guarantee that the contract owner will never lose principal due to a falling stock market. What indexed annuities do is they give the owner the opportunity to link the interest their contract will receive in any given year to the movement of one or more market indexes, with the caveat that a loss in the underlying index will never result in a loss of principal within the indexed annuity…which is, of course, completely different from what happens in variable annuities.
In a nutshell, the purpose of most indexed annuities is to give their owner the opportunity over time to enjoy an annual interest credit that will range from 1 to 2% more annually than fixed annuities do. That’s it. And in most indexed annuities, the client gets to choose every year whether or not they want to receive the fixed interest credit declared by the insurance company or link the interest they are credited to an index (usually the S&P 500) to boost that return by a point or two. If there is a gamble involved, it is that the index actually declines over the measuring period the contract owner would receive a 0% interest credit rather than the 1%, 2%, 3% fixed credit they would have if they had chosen that crediting option for that particular year.
Two key points then to understand; first in any given year, the worst that can happen is you would receive a 0% interest credit. And second, credits made in a previous year can never be lost in a subsequent year due to a negative movement in the measuring index during that year.
I sincerely hope these few paragraphs have helped both you and your readers to gain a better understanding and appreciation of the many benefits of indexed annuities.
Cherish the day,
Frank Laise, CLU
I think the bank manager stirred up this mess. The courts should have put the bank manager on trail for selling the CD. If i was convicted over something like this i would have kicked the bank managers teeth in.
I’m right there with you!! Though she would deserve it, both you and I would rightfully be criminally convicted of assault and battery!
I did not know who Glenn was until a month ago, but have spoken to him a number of times since then. He is a gentlemen! In one of our conversations I asked him to describe the prosecutor, Rachel Abelson. Absolutely could not believe that he did not have a negative thing to say about her personally…on the contrary…told me he approached her and shook her hand AFTER he was convicted, and told her “No hard feelings”...
Was Glenn railroaded by out of control regulatory and judicial systems? Absolutely!
Amazing how many folks don’t get that!!!
Cherish the day,
Frank Laise, CLU
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Case was overturned in full 3-0 in the appeals court 10/8/2013. I am back to work working with Tarkenton Financial.
FOR IMMEDIATE RELEASE
Glenn Neasham Insurance Agency
A Winning Team for Retirement
The “Safe Money Guy” Glenn Neasham teams up with
Hall of Famer Fran Tarkenton and company
Hidden Valley Lake, CA, February 20 – Glenn Neasham, President of Glenn Neasham Insurance Agency, is pleased to announce that he has affiliated with Tarkenton Financial LLC, a national financial marketing organization led by Fran Tarkenton, NFL Hall of Famer and renowned entrepreneur. Neasham and Tarkenton Financial will work together to provide clients with retirement strategies focused on guarantees, asset protection and income.
Tarkenton is widely known for his 18-year NFL career as a quarterback for the Minnesota Vikings and New York Giants. He was inducted into the Hall of Fame in 1986. Since football, Tarkenton has built a reputation as a respected entrepreneur with more than 20 successful businesses. He founded Tarkenton Financial in 2003 to focus on “improving the quality of life for retirees across the country.”
“Every day 10,000 people are turning 65. For every 65-year-old couple, there’s a 50% chance that one of them will live to be at least 85 years old. People are living longer and need products that can offer them income throughout their retirement,” Tarkenton says. “At Tarkenton Financial, we help retirees address concerns about outliving income, avoiding market volatility, and getting more out of Social Security benefits.”
Neasham agrees. “A recent study found that 61% of retirees said they feared outliving their money more than they feared dying,” he says.
Neasham has owned and operated the Glenn Neasham Insurance Agency for more than 25 years, helping hundreds of clients plan their retirements. He’s experienced in helping his clients create a more secure retirement using guaranteed income from annuities, estate planning, and tax-deferred vehicles. As a result, his clients often call him the “Safe Money Guy.”
Neasham is a veteran of the United States Navy, serving on active duty from 1978-81 and as a reservist from 1982-84. He was proud to serve on both the U.S.S. Emory S. Land and the U.S.S. Enterprise.
By teaming up with Fran Tarkenton and Tarkenton Financial, he is proud to work with not only one of the country’s most esteemed athletes, but one of its most trusted business leaders. To learn more about the services available through the Glenn Neasham Insurance Agency in conjunction with Tarkenton Financial, please call 707-809-7135 or 707-367-5003
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