Disgusting is the only way to put it.
Associated Press reports on the plight of Susan Bernardo, a single mom raising a son after her husband was killed in an accident. She received a settlement, as did her boy, who was three-years-old at the time of his father’s death.
Her broker recommended she sell her positions in municipal bonds for higher-return partnerships in energy and real estate investments in order to boost her income. Higher returns are of course accompanied by higher risk, something she claims she was never told, or at least just how risky the new investments were. She also claims she wasn’t informed of the fat 5% commission her broker collected.
Her portfolio value is now halved, and she has to dip into her son’s settlement to help pay the bills. One problem—the broker has him in variable annuities with equally stiff contingent deferred sales charges. The money’s locked up, and the wire service claims “more than a third of every dollar goes towards penalties and taxes.”
Knowing the media’s penchant for “if it bleeds it leads” sensationalism, a few questions are raised by the piece but never answered. We all know of star analyst Meredith Whitney’s famous prediction on “60 Minutes” that a massive wave of municipal bankruptcies would plague the land, causing a market crisis far worse than what was experienced in 2008.