Regulation and Compliance > Federal Regulation

Bad Apple Advisors and Senior Clients

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Since I began covering this industry in 2008, I’ve continued to follow an interesting debate. On one hand we have the mainstream media pointing out renegade advisors who they say offer bad advice to gullible clients. On the other hand, once we peel back a layer or two of this surface reporting, we find a handful of bad apples who give the entire industry a bad name.

As I get out and talk to advisors, almost to a man (or woman) I encounter people who are out to do their best by the client. They truly do put the client first. Maybe it’s just me, but it’s been a consistent occurrence. And, when I talk with people within the industry they continue to trumpet the idea that the increased scrutiny and tighter compliance and regulations have forced many of the cowboys out of the field of play.

As you continue to put those customers and prospects first in your own practice, it’s important that you keep sight of those diminishing number of bad apples by either keeping your distance from them or policing their bad behavior. As we do every month, we check in with Harry J. Lew of the National Ethics Association, who provides us of with examples of those bad apples.

As I said last month, “as you read these case studies, please keep in mind, what would you do? What, as an advisor, can be done or should be done? While the money’s great, at the end of the day, if you treat the client right, the money will come, right? It’s the client that needs your help.”


A brokerage firm representative victimized an Alpharetta, Georgia woman after noticing her husband’s obituary in the newspaper. He approached her with an offer to buy a security designed to generate funds for heavy equipment maker Caterpillar. Believing that the investment would pay 4.2 percent, the woman invested her life’s savings of $145,000. In fact, the security was bogus and the woman lost all her money.

A Texas insurance agent has been indicted on multiple counts of mail fraud and aggravated identity theft in connection with a Medicare Advantage fraud. According to the indictment, the agent illegally obtained beneficiary personal information and then used it to purchase Medicare Advantage policies without their knowledge. She then received thousands in commissions as a result of the false enrollments. After the Medicare Advantage insurer uncovered the fraud, the agent then initiated a similar fraud with a pre-need funeral expense insurer. Each count of mail fraud carries a sentence of up to 20 years in federal prison without parole. In addition, each count of aggravated identity theft carries a two-year prison term.