Founder & Private Wealth Manager
Burning River Advisory Group
Vargo recalls an instance involving a client and her young daughters, who were ages two and four at the time. The client’s husband had recently died of cancer.
Within three weeks, Vargo says, the husband’s financial adviser had persuaded the widow to apply for variable universal life insurance policy, fund two non-traded REITs, open and fund a variable annuity, open and fund two 529 plans, and roll over her husband's IRA and company retirement plan into a fee-based IRA.
In short, the adviser had tied up almost all of the family's $1.25 million in assets in high-commission products with no liquidity. Because of that, the 40-year old widow had only $250,000 in liquid assets to support her family, Vargo says.
“We had no options on the two non-traded REITs, as they had high surrender fees and a general lack of liquidity,” he says. “We transferred the 529 plans to a more appropriate 529 plan without additional fees, stopped the purchase of cash value life insurance and looked at more suitable options, and were able to unwind the variable annuity, including the huge commission, as it was within the 30-day free-look period. She went from $250,000 to $1 million in liquid assets.”