“Guaranteed growth rate.” Hmm...

Annuity ad misleading, claims overblown

“There is no risk to the consumer...it is all upside, no downside.”
  • “There is no risk to the consumer...it is all upside, no downside.”

Forbes columnist Ken Fisher proclaims, “I hate annuities.… The contracts are huge, obtuse, confusing and hence rarely read. Sales reps rarely realize the lies they peddle.” Sales commissions can be 8 percent or more, says Fisher, who compares some annuities with Ponzi schemes.

Senator Elizabeth Warren has gathered information on sales incentives for “indexed” annuities, which are tax-deferred savings vehicles, issued by insurance companies, whose returns are tied to a financial index, such as the Standard & Poor’s 500. The indexed annuity is “widely known within the industry for the perks available to agents,” says the Wall Street Journal. Experts say such annuities have “serious limitations on the upside potential” and are “controversial because of the many ways consumers can misunderstand” them, says the Journal.

Senator Warren wrote to insurance companies, demanding information on the incentives for indexed annuity sales representatives, such as touring “the Mediterranean on a private yacht, like royalty, celebrities, and the wealthy elite,” as put forward in some marketing materials.

Mansueto’s U-T ad promises huge returns and looks like a bank ad.

Mansueto’s U-T ad promises huge returns and looks like a bank ad.

A curious ad has been running in the Union-Tribune in recent months. It touts a “guaranteed growth rate.” And “checkbook access.” And “25% deposit bonus for IRA/401k/CD transfers.” And “10% deposit bonus on new savings accounts.”

Hmm... Those words “deposit” and “new savings accounts” suggest this is a bank offering a savings account netting returns of six times what other banks are paying. The ad was placed by Exalt Financial & Insurance Services, on Camino Del Rio South.

“The language of the ad appeared to offer some kind of CD [certificate of deposit] or bank deposit since it includes the words ‘deposit,’ ‘savings accounts,’ and ‘checkbook access,’ which would indicate that the offer was for a bank deposit or CD,” says Steven Kane, who recently retired after 40 years of practicing law (and unraveling some notable scams) in San Diego. He continued, by email, “Also, the offer includes the phrases ‘guaranteed growth rate’ and ‘guaranteed growth,’ which could be interpreted as a promise the investor cannot suffer a loss. We all know there is no such thing as a risk-free investment. Finally, the ad promises to give the investor a ‘bonus’ of 10 or 25% on his or her invested capital. Any investment which offered such high immediate appreciation today in the era of 1% or less rate on bank CDs would, indeed, be extraordinary.”

I sent a copy of the ad to Mark Leyes, a spokesman for the state Department of Business Oversight. “To guarantee a return is a red flag consumers should be aware of,” said Leyes. “Any potential investor should ask and has the right to know what is the source of [the] returns.” Leyes then took the ad to an executive in enforcement. “We are reluctant to declare it legal or illegal without understanding more details. But she agrees with me that statements such as ‘guaranteed growth’ and ‘no losses’ are red flags, since it is nearly impossible to back up such assertions.”

Robert Mansueto

Robert Mansueto

I called Exalt Financial and talked with its owner, Dr. Robert Frank Mansueto, who spends 60 to 70 percent of his time helping doctors and dentists reduce their taxes and the rest of the time selling single premium, fixed, indexed annuities. That means that the customer pays an amount of money up front, the insurance company guarantees to make payments beginning at some date, and the annuities are indexed, mainly to the Standard & Poor’s 500. I checked with the Department of Insurance: Mansueto has a license and a list of impressive insurance companies he works with.

He is ebullient. “There is no risk to the consumer, guaranteed growth. No consumer has ever lost a nickel. It is all upside, no downside. There is no risk of loss if the market crashes,” he enthuses, and there is a tax advantage.

After I asked him a few questions, his answers were less all-inclusive. One problem with annuities is that if you want to get your money out early, you pay a huge penalty. “I am not aware of anybody who has ever been hurt, except for those who want [their money] back,” he says.

There is another big problem: the policies are very complex. Customers have to understand any contingency that could cause them to lose their principal. And then there is something that many people these days have forgotten about, or never experienced: inflation. It could erode purchasing power of those dollars handed out by the insurance company. “I have no control over that,” snaps Mansueto.

Also, insurance companies cap the amount of gain the customer captures. The Standard & Poor’s 500 may go up 10 percent, say, but the client gets only 3 percent.

Another critical factor is the reputation of the person selling the policy. On this measure, Mansueto flunks. Originally, he was a dentist, specializing in implants. In 1993, the state Board of Dental Examiners placed him on five years’ probation and suspended him from practice for 60 days for altering the dental records of a patient who had sued him. Mansueto did that “with intent to deceive,” said the board, noting that Mansueto had also lied under penalty of perjury.

In 1999, after he had been disciplined again and was still on probation, the board cited its “profound concern” about his “dishonesty.” The board is “left with the feeling that Dr. Mansueto still thinks there is something relative about the truth and that it can be fashioned for the occasion,” said the board.

In 2005, the Dental Board of California (the current name for the Board of Dental Examiners) revoked Mansueto’s license. That has not changed. In this instance, Mansueto was charged with “serious and substantial” violations of the Dental Practice Act for negligently mishandling three patients.

In revoking his license, the board also noted that Mansueto in the year 2000 had advertised in the Union-Tribune that people suffering from migraine headaches should try his “revolutionary new approach for the successful treatment of migraine headaches.”

“A licensed dentist cannot diagnose or treat a true migraine headache,” said the board. Mansueto’s newspaper ads “contained false, fraudulent, misleading and deceptive statements.” Mansueto refuses to speak about his run-ins with the board.

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One of the most sage advices out there is, "If it sounds too good to be true it probably is."

MichaelValentine: Yes. That is always good advice. Best, Don Bauder

I think money managers are expendables. I asked my husband not to invest in - at risky to loose stocks - of unknowns, but his brother-in-law is at Franklin Templeton so I lost from his need to give away to several investment companies. Can't tell how much by 2008. If we had invested in a 2nd property in my area as I had asked, day of wedding in 1991 but ignored as stupid female, we would have had several hundred thousand from it. I read the property value, not daily stock ups and downs. Even saw the ridiculous bubble ready to pop.

shirleyberan: Sometimes stocks are better than real estate, other times real estate is better. In the 2007-2009 Great Recession, neither was good. Best, Don Bauder

Don - James (Jamie) Beran was a recovering addict when he was a computer analyst moving records online for the county. The end of the 80's.

shirleyberan; What has happened to him? Best, Don Bauder

Don - I'm cold because my young, early 20s daughter had my old wall heater taken out for her and friends version of remodel. Hope you are warmy and take zinc. Another recomemation is something berry, billberry, looking. No Flu or Severe anything allowed!

shirleyberan: I was hospitalized with severe flu for eight days February of last year. Best, Don Bauder

Mr. Bauder, did you reveal your identity at the beginning of your call, so he was on guard or were you anonymous and he slowly clammed up because of the increasing quality of your questions--which no patsy would think of asking?

Flapper: Of course I identified myself as a Reader columnist immediately. That is just basic journalism ethics. Best, Don Bauder

That is not true Don and you know it. I was the one you spoke to. You misled me to believe you were calling to get information for you as a retired person In Colorado. I recognized your name and you were truthful about being the former San Diego Union writer I had heard about for which I and said I was honored to speak with you, and proceeded to e mail you much current research information you requested and INsurance company materials that were 100% accurate. I found out from a mutual friend that you were a wall street advocate and anti Insurance and annuity, which like it or not, is an integral part of our economic system,

It was not until your 2nd phone call 2 weeks later that it became apparent after I asked, that you were out to do a smear article...to which I expressed my disappointment in your tactics. Now who has the long nose here Don?

Since that time, Wall street has lost much principal for savers. Why would you not be truthful about a simple question posed by a third party?

I remember last year when it wasn't good for you. James was a heavy smoker from his early years born and raised in Chicago. Will always be my favorate. Died on his 64th, Dec 23, 2011. We were married 20 years plus another 10 back and forth. He could have should gone to our La jolla doctor Broomberg that he liked but didn't. Seriously, when you're sick, go to the doctor. He didn't.

shirleyberan: Agreed: sick people should see doctor. Best, Don Bauder

Are there points off for jibberish spelling? New Bernie Madoff movie coming soon.

shirleyberan: Haven't heard of Madoff movie but I did see The Big Short and it is one of the best movies I have ever seen. Best, Don Bauder

My observation over many years is that if an insurance company is selling it, it will be a very poor investment. Why that is, I don't completely understand, but the fat commissions paid to the agents have a lot to do with it.

There are many sectors of the economy where potential investors are ignored by the traditional stock brokers, and others of that ilk. One big one is teachers, who are eligible to put before-tax dollars into tax sheltered annuities (TSA's). Most of the time, if they are ever approached by anyone selling TSA's, it will be an insurance agent. Some teachers are savvy enough to know that they can head to a mutual fund company or a discount broker, and do it themselves. But many, many are financial illiterates, and need someone to make the process clear. Many other people who could benefit from putting small sums aside and investing them just don't ever hear from a securities or mutual fund sales rep. And once again, if they are approached, it will often by by a person who peddles insurance first, and investments as a side line.

So, now grifters are running newspaper ads that are misleading, and aimed at the financially naive. I don't know which is worst, insurance agents or operators like this one.

Visduh: Yours are trenchant observations. Many insurance products are questionable, although you can't condemn the entire industry. Annuities are definitely dubious, particularly because there are lots of contingencies; you can lose a bundle if you have to take money out for emergency purposes. You have to read the fine print carefully. Also, if you get your initial payment back a number of years later, the money you get may have lost purchasing power. Best, Don Bauder

Did you know that the average Mutual Fund makes at least 3% a year on the investors deposits? and that the average American with a 401k in Wall Street loses over $150,000 over the period of participation to hidden fees and costs..?

What's your opinion on 412(e) 3 Defined Benefit Plans Visduh?

John Vaux: This ad appears to be an attempt to mislead people into believing that this product is a bank CD. Mansueto has gotten in trouble before for false advertising. Dental regulators nailed him for advertising that as a dentist he could treat migraine headaches. The Dental Board of California criticized him sharply for advertising that claim. (Eventually he lost his dental license for other reasons.) Best, Don Bauder

Look up Dental Treatment for migraine headaches today and you will find pages of information. This is now a standard of care in the dental profession.

I was the first to discover and describe the Biomechanics and implement specific drug free treatment in 1999. As a pioneer I was prosecuted...while someone else took my work a year later and was heralded as the greatest mind in the dental world ever.

That was my research and my initiative.

Similar criticism by uninformed minds was levied on Dr.Joseph Lister for advocating Doctors wash their hands to reduce microscopic items called bacteria that he suggested caused many septic infections. He too was ahead of his time.

Jon Vaux - James was CIO/CoFounder of SicommNet Inc. They recently came through a bankruptcy where we lost all his accumulated stock. Sorry about that expendables crack. You see how Don sets the hook to easily reel me in without a fight.

shirleyberan: My hand shakes too much to set a hook. Best, Don Bauder

shirleyberan: Me too. Best, Don Bauder

Buy high sell low. It works every time.

AlexClarke: Beginning in early 2009 when the Federal Reserve began frenetically printing money, we have been buying high and selling higher. That strategy inevitably ends up unhappily, and it appears that 2016 may be the year of our discontent. (See market Friday, January 15). I haven't given up hope yet, though.

The famous advice was "buy cheap and sell dear." Will we "buy dear and sell cheap" in 2016? Best, Don Bauder

Don Bauder, has had an illustrious career reporting on financial scams over the years. It is unfortunate that after all these years he cannot discern truth from fiction or perhaps he didn’t try?

He was given detailed research on modern annuity savings contracts that are sold by multi-Billion dollar Legal Reserve Backed Life insurance companies, along with research from the Wharton School of Business, Government Accounting Office, Fortune 500 magazine, and the Wall Street Journal.

He is convinced that it is a better for the average investor to gamble in the stock market rather than investing in new generation safe savings instruments that provide safety of principal, upside growth only, and upfront cash deposit bonus. Former Fed Chairman Ben Bernanke has put his savings into these savings accounts.

Since we spoke the market has fallen over 10%, while insurance company accounts have provided 10% plus gains. Savers would have lost significantly to Wall Street.

Some Insurance Companies offer variable annuity contracts. These are tied to stock market gains or losses. Many investors lose principal here. Exalt does not offer these risk of loss accounts.

After the 2008 crash,insurance companies, devised improved Indexed Annuities with up front deposit bonus money, no risk to principal, and limited market gains. Some allow market participation of 98% over a three years, and 6.5% guaranteed growth in income for life. In our aging society, they provide secure lifetime income.

A tradeoff is decreased liquidity of 10% per year, but no reduction in guaranteed lifetime income.

Our firm has implemented many Pension accounts for business owners and Doctors. No one has yet taken all retirement savings out in one year. There is penalty free full withdrawal if a disability occurs.

The intent of savings and pensions is lifelong income. Savers with Wall Street accounts lost 50% in 2008 which took many years to recover while losing growth during those years. The current correction remains an unknown.

I believe Mr. Bauder means well, however, his is terribly misinformed, and quite pro Wall Street. He simply did not take time to read and understand what I personally provided him, his being emphatic about possible future inflation and “No Losses of Principal” I fail to see the connection between the two?

the 1929 depression Insurance companies were the only safe haven that survived the economic calamity. Could history be repeating itself again? Time will tell.

Mr. Bauder told me he was enjoying retirement in Colorado. I certainly wish him well and hope that he consider using his talents and former prestige to help people prevent loss of their savings instead of marching the drum roll of Wall Street that has inherent risk of losses for our aging population, that once out of the workforce, would not have time to recover losses.. That would indeed be a shame for all concerned.

Personally I'd be real weary of sitting across from someone advising me about investments (or heaven forbid, selling me investments) when they have a history of seeking bankruptcy protection.

According to public records (California Southern Bankruptcy Court) Robert Frank Mansueto filed; Chapter 7 personal bankruptcy on 6/12/1997, another on 2/19/1998, and 7/26/2004 and again on 7/27/2010.

3 of the 4 were withdrawn.....was to gain time in large underwater real estate ventures with several others involved. All were successful in salvaging overleveraged real estate. Was a business decision.

Trump used the system in a similar manner. I learned it from him....it was successful. The system is what it is. When you can use it to salvage assets...why would you not? Mission was successful. What is the relation to Ponzi? Seems like Trump might be more relevant analogy?. Ponzi was not involved in complex real estate deals.

You are no Trump. He used the system. You abused it. There's no comparison.

And do you disclose your bankruptcy abuse tactics to your clients? You filed BK six times! Over the years you did not learn how to avoid these problems?

You "learned it from Trump." That says a lot. Trump would fire you. Seriously? You are comparing yourself with Donald Trump?

Trump's BK's were corporate. Trump has never filed personal bankruptcy. Yours were personal bankruptcy! Your credit must suck.

How do you get bonded? I hope you are not in a fiduciary capacity in any of your dealings.

You seem to have a lot of biased opinions based upon your own inaccurate rhetoric. Your allegations are not accurate. Is the reason you do not put your name on comments you make under anonymity?..or is your name Ponzi?

Mine salvaged a large custom home in Coronado that I built after reading Trumps 1st book...timing was bad....

I learned alot from Trump and one of his friends that is in my family....(also a member of the "B" club)....

You seem to harbor anger....? I am Sorry for that

I feel sorry for your clients because they deserve better.

My parents always said if you don't have anything nice to say about someone, then don't say anything at all. I suppose everyone is entitled to their own opinion...even if based on inaccurate information. Work is elective for me at this point Mr or Mrs unknown. Why don't you browse the net and listen to my music....is under my name ....played with some of the best in the world Larry Carlton (Steely Dan) and the immortal Joe Pass. Yes I am a professional musician also. Is that a bad thing too? Maybe that will help you to see another side you are unaware of. I don't even deal with many general public..just teaching younger agents. My area is complex Pensions for high income Doctors that few know about, and fewer know how to implement. What do you do?

You craft all these diatribes. You are a narcissist. You do not know how to take responsibility for your actions. You blame other people, excuse your behavior on the actions of someone like Donald Trump and then brag about some random talents.

I'm going to end my comments with you. I have learned a few things about narcissists. They don't have any self-awareness. They always have to have the last word. They can do no wrong.

“Never wrestle with pigs. You both get dirty and the pig likes it.” George Bernard Shaw

I tried to post his in response to Manasueto's diatribe against Mr. Bauder in the Letters to Editor section . . .

"Manasueto's rambling screed, despite its length, seems more a blatant farrago of diversionary tactics than any kind of specific response to Bauder's actual remarks.

"Certainly a Doctor (or a former Doctor) should have the intellectual discipline (or if you will, the "class") to quote the offending remarks, then actually discuss the opposing points with evidence rather than innuendo. Methinks the (once-) good Doctor be hoisted upon his own water-pick."

. . . but the Reader interface insisted that it be posted to "Facebook." I am posting it here because I do not want to be "on" Facebook or any other commercial social media site.

As Turkow would say, "IT AIN'T RIGHT!" Shame on the Reader!

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