Many examples are emerging where retirees are losing significant funds from their pensions and 401(k) accounts because they are seduced into turning them over into high-fee investments that promise high returns. Studies show that as much as 69% of pre-retirees miscalculate how much money they can annually withdraw from their retirement accounts, which gives rogue brokers the opportunity to take advantage of these investors in order to generate more commissions.
Brokers and brokerage firms gain access to groups of workers who are close to retirement through free seminars and advisory services offered through the workers’ employers. These presentations have the potential to be misleading for workers who have limited knowledge or experience investing money. Studies show that 10% of these so-called seminars have explicitly offered fraudulent advice and given unrealistic guarantees on high rates of return.
In January, a group of Kodak and Xerox retirees from
Many other investment brokers in
Morgan Stanley’s policy is to cooperate with the investigation and claims that many of the clients’ losses were caused by the market downturn of 2000-02 and other excessive withdraws from the clients. Investor attorneys have filed a number of arbitration claims on behalf of Kodak and Xerox employees.
InterSecurities, a financial firm in
Likewise, in 2006, 32 former ExxonMobil employees won $13.8 million in an arbitration case against Securities America because one of its top brokers told the employees that they would receive 18% return and still withdraw sums of money equal to their salaries. Since then, Securities America has greatly improved its oversight and policies.
Investors should be on the lookout for brokers who recommend they withdraw money from their retirement plans in order to make other investments. Oftentimes the only one who wins under these circumstances are the brokers themselves.