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Financial Advisor Did Not Complete POD

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Billy Shears

Junior Member
What is the name of your state? Oklahoma

My mother, a widow, passed away last month at age 84. She sold her house a year and a half ago in a small town and moved to OKC to a retirement center. She asked her financial advisor, who she felt loyal to and trusted, to handle the proceeds prudently as she would need it for income. So he put the entire proceeds from the sale, $40k, into a single CIT bond, paying semi-annually, with a maturity in 2021. Whether this was a suitable investment comes to my mind. Her remaing asset, $20k, was in an annuity. So she had total assets of $60k.

We notified her financial advisor of her death, who informed us she had a beneficiary for the annuity, but not the CIT bond. He apparently failed to put a POD on this when he set this up. Seems rather negligent to sell a long-term bond to an 84 year-old widow without getting a POD or named beneficiary. So now the executor of the will, my sister who lives in Minneapolis, will now have to spend time, money, and court costs to go through probate in OKC.

The bond does have a Survivor's Option, which meets the requirements, and we intend to exercise to get the full principal refunded. My questions are the following:

1. Are there any other options to expedite this? The advisor says we need to get a Letters Testamentary before taking any action.

2. The CIT bond - appears CIT is having liquidity trouble as they had to access a line of credit yesterday to fund bonds maturing in 2008. Will we still be able to exercise the 'death put' if the company fails or files bankruptcy? Can the advisor's firm be liable for this inappropriate, unsuitable investment? If my mom had lived, it's questionable she could have depended on this for income given CIT's precarious financial situation.
 


anteater

Senior Member
Indulge me for a moment while I rant a bit... You are probably being charitable by using the term "financial advisor." It is almost certain that this person is a broker or life insurance salesperson with a Series 7. Placing the majority of a client's assets into one bond is irresponsible. I could only wish that ignoring the basics of portfolio construction were criminal. But, it isn't.

That said, I don't believe that you (or, rather, your mother's estate) have the basis for a complaint. If this is a broker, the standard is suitability. I have no idea what CIT's financial picture and the bond rating was at the time it was sold. But, I doubt that buying a fixed income security for an 84 year-old would violate the suitability standard. A single bond, dumb. Basis for a complaint, doubt it.

While a decent "financial advisor" will at least inquire about placing a benerficiary designation on an account, there is no obligation to do so. It is really the client's responsibility to make certain that it is done if the client wishes to do so.

I don't know if OK has some simplified procedures for small estates. You will need to consult with an OK attorney on that. If probate does need to be opened, one suggestion: if the family gets along and trusts each other, suggest that your sister waive her right to serve as the personal rep and allow you to serve. That would be a cost- and time-saver. (And OK may have some additional hoops for a "foreign" personal representative.)
 

Billy Shears

Junior Member
Indulge me for a moment while I rant a bit... You are probably being charitable by using the term "financial advisor." It is almost certain that this person is a broker or life insurance salesperson with a Series 7. Placing the majority of a client's assets into one bond is irresponsible. I could only wish that ignoring the basics of portfolio construction were criminal. But, it isn't.
Yes, the advisor is an Edward Jones rep. That pretty much tells you about his competence. If I have to I will take this to arbitration.

Any suggestions on how to proceed?
 

tranquility

Senior Member
I agree with anteater and see very poor "financial advisors" every day. Things which seem obvious to us are not handled in a manner which is deserving from the amount of fees paid. We don't do such planning as we don't know enough. But, on review, we find many errors. Here there were errors, but I don't see them as being compensible.

It is not their duty to properly title the account beyond the written instructions. Would we hope they give advice? Yes. But, maybe they are prevented from "practicing law" by the guidelines and the company thinks such advice is practicing law. While suitable investment is the guide, mom wasn't out money. She did get income through her life. While I think the sale of annuity to someone that old is near malpractice per se, since there are special circumstances where it is appropritate and the details get fuzzy so fast, rarely can you go after such "financial advisors" who are nothing more than commissioned salesmen.

The bottom line is that, while I think you were hurt, bringing up a lawsuit on such things isn't going to be worthwhile. The loss is speculative at best. And, the liability at all is just as speculative.
 
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Dandy Don

Senior Member
Maybe there is a case history or valid grounds for legal action here, but what happens if the advisor says it was the widow's responsibility to indicate and follow through on a POD designation if that is what she truly wanted?
 

candg918

Member
Contact the Oklahoma Tax Commission - Estate tax group. They were helpful to me in completing the paperwork. Their website gives several ways to contact them. They were able to direct me to a 2 page form to complete my mother's estate when all I had been able to find was the horribly complicated long form. From the size of the estate indicated, the paperwork should be the short form and is very easy to file.

Search on "Oklahoma small estate probate" for useful info from several organizations and attorneys on really small OK probate property estates. Recall that all of the tax estate is not necessarily in the probate estate so be sure to have sorted these out.

The people at the courthouse should be able to direct you to more information on small estate paperwork requirements.

(I learned all this when another state wanted me to open probate just so I could recover an unclaimed overpayment of property taxes on property that had never been put into her living trust.)
 

Billy Shears

Junior Member
Maybe there is a case history or valid grounds for legal action here, but what happens if the advisor says it was the widow's responsibility to indicate and follow through on a POD designation if that is what she truly wanted?
I hear what you're saying, but he charged $700 for the transaction. You'd think he would have done a little work to make sure all the 'i's are dotted and 't's are crossed. My mother trusted him to do this, which he did do with small annuity he had sold her too. So much for trust and loyalty for keeping assets with him. I think it's gross negligence or incompetence or both. It's not just the hassle of probate that's a problem, but if my mother had lived, there is a real possiblity this CIT company may default on this bond. Pull up a stock chart of CIT and you'll see. Talk about lack of diversification or fiduciary responsibilities....it was just a quick $700 for him for no work.
 

anteater

Senior Member
. Talk about lack of diversification or fiduciary responsibilities....it was just a quick $700 for him for no work.
You seem to be upset about two things:

1) Placing the $40K into one bond. That is dumb and an argument could be made that it violates "fiduciary responsibilities." But, there lies the problem. As a broker, he is not held to a fiduciary standard. The standard is suitability. Unless you can get in the wayback machine and make an argument that CIT debt was a high risk investment and unsuitable at the time it was sold, I can't see you getting very far. That CIT is now having problems due to the liquidity crunch is not going to get you very far, in my opinion.

2) The lack of a beneficiary designation. Quite simply, it is the client's responsibility to see that this gets done.

(Truthfully, $700 is not that high a commission on a $40,000 transaction at a full service broker.)

....If I have to I will take this to arbitration.
Unless you are going to get that appointment as the estate's personal representative, you don't have standing. Even if you do get appointed, arbitration is going to cost you money and take probably a year. My advice is to get probate opened and a personal representative appointed and then exercise the bond's Survivor Option and see what happens. Until that is done, as Tranquility noted, there are no damages. (That does not imply that I thnk that you have a strong case anyway, but, before you go to arbitration, you have to prove that damages exist.)
 
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