BAD ADVISERS

Not all bad financial advisers look goofy. Some look very sophisticated. Some may even have impressive credentials. But don’t be fooled. You can’t judge the value of a book by the cover. And you can only find true competence by asking the right questions. Many bad advisers are referred by a friend or a relative. What a big mistake that can become. I have to admit it…. June 2021 has become an absolute client disaster. Below I will profile my client interactions that after all these years, added new information to a very old, seasoned financial adviser. (Me)

It started in May when a new client asked me to help him. Coming in to tell me he was behind on filing his personal and corporate tax returns. Then it was discovered he was 10 years behind on taking out RMD from his employee private pension plan which was out of cash and only holds expensive Arizona land in it. Upon closer examination by our firm, it was discovered required IRS form 5500’s were tardy as well and mostly because he stopped paying for a local licensed appraiser to appraise the land value for IRS purposes each plan year. (Which is reported to the IRS annually on form 5500).

It appeared the death of his spouse started things on a downward trend for this 80-year-old retired doctor. And upon multiple meetings, it appeared he was dis-oriented in finding my office and finding the correct office building once he parked. In our last meeting, he was lost out on the freeway going up and down, a first. I informed him of his financial problems once discovered in long reviews of his “spotty” paperwork provided to me. I was noticing some cognitive issues as well and asked him to have his daughter attend the next meeting. I was ready to implement procedures to sell the land, and pull out past RMD’s in 2021 tax year (over 150k). And then to ask for abatement of the IRS 50% penalty for failing to take out annual RMD’s. It was impossible in the past since the plan was cashless and he was actually paying property tax on an ERISA governed pension plan without outside money. (That alone could be grounds for an IRS determination the plan was “dead”)

I admit, it was a case of cases with more problems, situations, and sad stories most likely over any other case our firm has tackled. But I was the one adviser in the Valley who knew how to help him. That ended yesterday when he informed me his children demanded he use one of their CPAs and so he simply fired me in an email. (A pretty rare event for me or my firm) I guess it is for the best since I had already determined I could not go forward with work if his family (at least one) did not sit in on future meetings. I was fired because his daughter’s CPA manufactured a story to issue “dry” withdrawals and tell the IRS he was in satisfaction with his annual RMD by issuing fake 1099’s to him. This was done in 2016 and perhaps before 2016. Since then, it appeared he did nothing with his RMD problem until he came in to see me. I also found his valuations last performed were 1/2 of the true value of the land the plan owns. The IRS calls it gross misrepresentation and perhaps, tax fraud. The client blamed his advisers. But I now think he was under-reporting on form 5500 just to lower the penalty. (until you are caught, then IRS can levy a 100% penalty in some cases for self-directed pension and IRA plans.)

I of course immediately tossed another red flag down amongst many. I knew there was no such thing as fake “dry” RMD amounts paid and secretly give credit later when the property was sold and the remaining RMD amounts he was behind on could be taken out. The daughter’s CPA committed tax fraud! To back up my decision on this matter, I engaged my friend, Attorney Natalie B. Choate. She confirmed the procedure did not exist and laughed with me in emails on how crazy the CPA must be to expose herself to liability for hiding the 50% penalty the client truly did owe for the last 10 years. And that got me fired. The family didn’t like an honest adviser such as I claiming he found “tax fraud” by the past CPA that was employed. A new CPA within the family will take over now. Will they give the same bad advice the client got from others? Perhaps. I will never know and frankly, no longer care. In fact, I am free from a nightmare case that would have been my greatest victory if I had fixed all the IRS and DOL problems I observed. A $2,300 per day fine will wipe this former client out if the DOL goes after him. Based on 10 years of bad legal and tax advisers… they most likely will not get the doctor’s problems fixed properly. He could die penniless if the IRS and DOL determine he willfully disobeyed applicable laws.

The second incident also took place today when I made the final decision to release a Living Trust client who just became a widow a month ago. She has our professional trust portfolio in place and is a super nice lady. But her college professor daughter brought her into my office to demand I change all powers and trust powers over to her in a meeting to take place after our initial meeting. My trust client is also 80 and has some physical disability needing assistance it appears. She seemed mentally competent under Arizona law by my general observations since I first met her and her husband about 9 years ago. But her daughter demanded I quote her the cost to assist them in making the changes which I could not do specifically. She was picking and choosing what documents her mother should update, rejecting needed changes because she thought the rough price quotes she demanded I give her (remember, her mother is my client not her) were too much money. She also had called me with her mother on the phone and demanded I did not inform her brother (who has GDPOA and Successor Trustee “first” position appointments in his parent’s living trust), that we spoke by phone first. Crazy stuff!

It got worse during our recent physical meeting that was costing me a bundle of unpaid time. Though I set an appointment to see them again in September, today I sent the widow a letter of resignation if she indeed wanted to appoint her daughter in first position for financial money team positions. I informed her in my letter that she needed a qualified lawyer to help her in that case. This is because I observed insane levels of undue influence by the daughter (with no powers or rights to make portfolio changes). And a personality that would best be described as the Devil incarnate. I am ending my “bad” two days of negative client interactions and the month — happy I have reduced my stress loads greatly to enter into my July workload with much more pleasant cases to work on. Even with Covid-19 messing up business last June, this June was a nightmare!

So, be careful who you use to solve your financial problems. Sometimes, as this June has proven, the bad advisers are within the family I am hired or consulted on and contracted to help. Children are always welcome to assist my senior clients. But not interfere with professional work required just because they think their own financial professionals are better than I am. Because of the select, rare areas I practice in, some of the most difficult in financial advisory — this kind of mind thought of children influencing their parent unduly does much more harm than good. (as in my two examples in this blog post)

Some professional advisers, unqualified to practice in these select and difficult areas I practice in, will just make things worse. I’ve seen it often how they drill your money accounts for years and never produce any results. Just big bills! (Many of my closed cases prove that) Many of these professional advisers when it comes to sophisticated IRA and pension plans are clueless. Since some CPAs and attorneys hire me when their parent dies with large IRA accounts - it is sad that the bad advisers fool you with fancy clothes or offices and billing rates; or long ago earned degrees that are tarnished with recent low quality work results for their clients. Perhaps an honest and clear mind, with 45+ years of practice makes a difference in financial advice. Do you agree? I am ready to assist you and fix financial problems, not make them worse. Call me!

M.D. Anderson, Author

Owner, Financial Strategies, Inc.

1-800-782-2806