My David and Goliath Moment

I was hoping to write this post in time for the first anniversary of this blog, which was last month. But that time came and went in a flurry of CARES Act-related activity and murmur. So here it is now.

It was a sunny afternoon in October, 2015. For some reason, I remember the weather being brilliant. Maybe it was a harbinger of good things to come. I had just put my then-one-year old down for a nap. And then I did what exhausted mothers of toddlers do during that precious time- browse Facebook.

The renowned women physicians Facebook group- Physician Mom Group- was new back then but was still just as awe-inspiring (Thank you, Dr. Hala Sabry!) Humorous and tragic stories that make up life, useful life hacks, priceless CME, it was all there. As I scrolled, one post suddenly stood out. It was someone recommending “The White Coat Investor” as a good resource to learn about personal finances. Never having heard the name before, I opened another tab.

And didn’t close the tab for the next two weeks.

I devoured the website in those two weeks. I read every. Single. Blog post in there. And there were already a few hundred by then. Fortunately, there was no WCI Forum or Facebook group yet- or I’d never get done reading.

The first evening, when my husband got home, I told him what I’d stumbled upon. He seemed mildly interested, as with most things finance. I kept reading. And then I came to the posts about Whole Life Insurance. And this curious new term “term life insurance”. And my heart sank.

You see, my husband had already been in practice a few years by then. And the sharks found us promptly thereafter. The good new doctor in town had been sold a version of Permanent Life Insurance in less than three months of starting his first attending job. Without a whisper of other options that are out there. Like term life insurance.

When we see patients, we tell them about all available options. And then, based on our knowledge and experience, we may guide them towards what would be best for their situation. My husband and I expected professionals in other fields to behave similarly. Well, we were about to find out.

As I read on, I discovered both of us had missed the best time to fund Roth IRA’s- our training years. Heck, that was the first time that word even entered my vocabulary. We had never been told by our training institution that there was an employer-sponsored retirement account that was available to contribute to. Years later, I wrote about that bit in a guest post for The White Coat Investor here.

And then I came to the part about Variable Annuities. And MEGO. My eyes glazed over. I read those bits a few times over to get them straight. And my heart sank again. How did we end up making every mistake in the book? Well, this particular one wasn’t our doing, per se. We’d had help.

Three years into his first job in fly-over country, we moved back to Florida. We had both trained here and I was all done with snow and the lack of good Indian restaurants. My husband found another promising private practice job and we moved halfway across the country- with a two-month old in tow.

Things looked great- it was a good group of people, we found a vibrant community to become part of. And I found all the Indian food I’d been craving. Close to tax time, his colleagues introduced us to the guy who did everyone’s taxes. Soft-spoken and smiley, Mr. Everyone’s-tax-guy offered to come to our house to get our information for our taxes since we were new parents. We were grateful. He did our taxes for three years. Over the course of that time, he also became our “money guy”. My husband was an employee back then and could only put in about $18k or so into the company 401(k). We were savers, we wanted more options to save. Instead of advising us on a Backdoor Roth or simply to put in more into our Taxable account, he suggested we open Traditional (non-deductible) IRAs and a SEP IRA. We could put in a chunk of change into it and get tax advantages, he said. What’s not to like! Never mind that my husband’s employer did not HAVE a SEP IRA for the company. And we did not have our own businesses to qualify to do so. And the advisor put that money into Variable Annuities within those accounts.

I finally sat my husband down. It was a long chat. I brought him up to speed on everything I’d learned. Something was fishy and we needed to fix it. All of it.

It was humbling to discover how little we knew. How we had essentially handed over control of something as important as our finances to someone else- who did not have our best interests at heart. Maybe, not all professionals in other fields operate at the same level of diligence and ethics that we were used to in medicine.

The word “Fiduciary” had not been part of our vocabulary, either.

The Fix

We got in touch with an Independent Insurance agent who looked over the Permanent Life policy. For better or for worse, we were at the tail end of paying premiums for it- so it made sense for us to keep it. We both got ourselves additional life insurance. Term, this time.

We got our first Disability Insurance. I shudder to think that we’d gone so many years in practice without any Life or Disability coverage in place- especially with a young family.

We sought out a CPA to do our taxes. They had to amend our taxes due to the SEP IRA fiasco.

And then it was time to get the money out of those accounts. Small hitch there. The Variable Annuities the guy had put all the investments in, had a 9% Surrender Fee and hefty penalties. We had a six-figure sum in those accounts at that point. 9%+ was going to be a chunk of change. I thought long and hard and decided I wanted to fight it instead of quietly accepting it.

Yes, we had signed on the dotted line. But we had done so without proper representation. The “Financial Advisor” had not told us any of this as he was stuffing our money into these accounts. What was in it for him? Lots of commission.

Interestingly, I had asked him a few times over the years how he was compensated. He always skirted the issue. In his words, “they (the insurance company) give me a little bit for it”. Sadly, at the time, I did not realize that is speak for being commission-based. It used to confuse me a little bit- that we were getting a service without paying for it- but I didn’t know what I didn’t know.

I rolled up my sleeves and got to work. I read up everything I could find about IRAs, SEP IRAs and Variable Annuities. I understood that Traditional IRAs were not beneficial to us, being in the highest tax bracket, if we were not converting them to Roths. I read up on the rules for setting up SEP IRAs and other employer-sponsored retirement plans.

And Variable Annuities- they were the icing on the cake. I read about the high fees, the loaded mutual funds commonly held within them and how they were frequently sold to unsuspecting customers because of the high commissions they brought to the sellers: the insurance agents who are only pretending to be Financial Advisors- because there is no law that says they can’t.

I came across Senator Elizabeth Warren’s work ,trying to unmask this financial malpractice on vulnerable seniors. I came across the checks and balances that are supposed to be in place- FINRA Broker Check and the State Insurance Commissioner. I collected all the evidence and started writing the emails.

I know the broker who had sold us the products would not be able to help much. I needed to go higher up. I wrote to the Insurance Company which housed the accounts and funds within them. Their Customer Service contact, their Headquarters and their local office in my city. I heard back pretty quickly from the local office. They wanted to meet with us. We had gotten their attention.

We scheduled a meeting at the swanky downtown all-glass lakefront building they call their office. The head of the office, their risk management official and their legal counsel were at the table. At least, they were taking us seriously.

The first thing the head guy asked at the meeting, almost mumbling to himself and with a smirk, was how I’d found them. He had hoped their connection with the bad actor would not be uncovered. Umm, Google?

That first meeting, they used the helplessness act. That things were out of their control, that the broker acted of his own accord and that they had no idea. Also, that the fine print covered their rear ends. All said very politely. Sympathetically. We were not able to counter their points. The meeting ended with them promising to look into things to see if they could help.

I got home feeling a crushing sense of defeat. It had happened again. They had glibly talked their way out of this.

And then, out of the blue, we got a letter from the State Insurance Commissioner’s Office that they were investigating the very person who had been our broker/adviser and that they may call us for more information. Hmm.

I rechecked his profile in the company’s website. He had been terminated. Wow, maybe we were on to something, after all.

I scheduled another meeting.

The day of the meeting, as we parked across the leafy street, I took a deep breath and stood as tall as my 5’1″ frame would allow. I know this was my last chance. I presented all that I’d uncovered from the beginning.

• That the disclosure on fees was hidden in a 150-page binder- that we had received after setting up the accounts. Legally, it was valid- there was a 10-day cancelation period. But that did not make it any less deceptive.

• The quarterly statements that proved how the broker was churning our accounts- changing over from one investment to another- for no reason- and without consulting us- only because he made a commission with every buy and sell. How every fund in there was a loaded mutual fund.

• How it was asinine to try and tax-shelter money within a tax-advantaged account, which was their excuse for selling us Variable Annuities.

• And last but not the least, how we would have a legal leg to stand on about the SEP IRA.

I told them about the investigation from the Insurance Commissioner’s Office. And the fact that if they had fired the broker, they must know that he had done wrong. That I would write to Senator Warren’s office and get in touch with the Insurance Commissioner.

All I was asking for, was our money in those accounts to be returned to us without incurring penalties and Surrender Charges. Nothing more, nothing less.

They were much quieter this time around. I left the meeting not sure of the outcome but with a knowledge that at least, I had given it my all. They were the Goliaths. I was only David.

We heard back from them not long after. They were willing to accept our terms in return for our silence. We took the deal. The Insurance Commissioner’s Office never called us about the guy, so we did not have to cross that bridge.

Then, I don’t recall how anymore, I found out that the advisor’s Insurance Broker License had been revoked. Now he would not do this to anyone else.

A small win for Davids everywhere.

Sometime later, the accounts transferred over. To Vanguard. Thanks to the good voices in finance. Thanks to the professionals who do right by their clients, even when their clients don’t know better.

I am not absolving myself of fault here. Ultimately, it’s my money and therefore my responsibility. But for some reason, I had never come across the right information. The bad, self-serving voices are so loud, they drown out the good.

That is why I write this blog. So that maybe someone, somewhere will hear something that will help. Because taking care of your finances is not a choice or a hobby but just as important a chore as, say, brushing your teeth. And thankfully, with time, feels just as simple, too.