Back in 2008 and 2009, stockbrokers and financial advisors were flooded with telephone calls from frightened and panicked customers. Most customers simply wanted to protect their assets and sit on the sidelines during the market upheaval. However, if history has proven anything, it has shown that Wall Street is skilled at spotting sales opportunities. Not surprisingly, during the dark days of 2008-2009, many Wall Street firms pitched “alternative investments” to the market adverse clients.
Alternative investments are often structured notes; direct participation products; private placement partnerships and non-traded REITs. Alternative investments were seen as non-Wall Street in that they do not consist of the usual stock, bond or exchange-related securities. During the financial collapse, many investors went all in with alternative investments (even though many contained restrictions as to how much can be purchased). Unfortunately, many alternative investments have performed poorly. A good number of them have been exposed as Ponzi schemes. Many investors and seniors are left holding an empty bag.
Recently, I noticed a number of advertisements touting investments that have a “6.5% guaranteed growth rate” or “FDIC Insured Guaranteed rate of 4.6%”. One advertisement cautions the reader “don’t let the market correction impact your retirement!” The advertisements are meant to generate fear of Wall Street and the securities market. The advertisements are targeted to seniors living on a fixed income. The advertisements are presented in such a way that many investors and seniors initially view these products as Certificates of Deposit. However, the products are not Certificates of Deposit. The investments are typically fixed annuities or fixed index annuities laden with high commissions, fees and restrictions. Further, the advertised rates of return include a “bonus” paid by the brokerage or insurance company. Without the bonus, the rate of return is often around 2%. The bonus is designed to entice the client to a meeting or seminar where a sales pitch can be made.
The high yield guaranteed sales pitch has triggered an investor alert. The investor alert refers to the pitch as a classic bait and switch. You can view the link to the investor alert at FINRA’s website found at:
(Mark Brewer of Investment Recovery Counsel has represented hundreds of individual investors and seniors in Wall Street disputes since 1994. Mark Brewer can be reached via email at firstname.lastname@example.org).