Wednesday, February 07, 2007

Ooops, I Did IT Again!

The lovely Britney Spears isn’t the only person who should sing that song; our good friends at AXA Financial Services should as well.

Case in point: Single woman age 65, who is retired, receives a small pension and social security. She lives within her means and has some assets in an IRA and Annuity. She has no savings account per se, however she DID have about 43,000 in a non qualified portfolio which was divided 40% short term treasury fund and 60% in a moderate allocation fund. These funds could have been used in an emergency with limited impact on her taxes.

I went to see this person on some other issues and she started to show me a report that she had been given, a free financial plan. The person who made the plan used quite a few improper assumptions not the least was that the woman’s pension had a cola provision.

Anyway, she started to tell me how she had this visit from a firm that she had done business with for a number of years and her usual salesman didn’t show up, a new man did. She told him things were ok but that she may need to draw a small amount of money out of the accounts and that he said well your money has to work harder! He recommended that she liquidate the mutual funds (incur a 2% sales charge on some and who cares about the tax consequences) and put the money into an annuity. Of course the annuity is basically allocated 60/40. Oh yes, the annuity has a 7 year surrender period.

This is a tale that will be continued……….