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Retirement plan gone wrong

By Jennie L. Phipps ·
Wednesday, September 29, 2010
Posted: 5 pm ET

Earlier this month, the Financial Industry Regulatory Authority, or FINRA, awarded a 79-year-old client of one of the nation's largest mutual funds $110,000 to make her account whole again, compensate her for lost interest and pay her legal fees after her $700,000 retirement account got lost in the shuffle at the fund.

I'm not going to be too specific about this because the mutual fund wasn't fined, didn't admit guilt and won't talk about the issue. But there are four lessons to be learned from this incident for anyone who is relying on any advisory firm for retirement planning help.

  1. If you are dealing with multiple people, don't assume that one of them knows what the other is doing. In this case, the 79-year-old client was passed to eight different fee-based account representatives. According to the client's attorney, Neil Sussman, a partner with Sussman Frankel in New York City, none of the account reps were uncaring -- they were just busy and weren't able to spend enough time with the client to make sure that they were doing what the client really wanted.
  2. Get everything in writing and then read it. Just because an account rep tells you something doesn't mean it's true. He or she may not have understood the question. In this case, what the account reps were doing was presented annually to the client in a large report, which she was asked to sign. She admitted signing it without reading it. This is risky -- for anybody.
  3. Be realistic. Part of the problem here was apparently the account reps' eagerness to please the customer, who wanted more money from her retirement account than it could realistically earn in a down market. Even the retirement planning adviser can't work miracles. Learn what a reasonable return is and be dubious about claims from money managers that they can do significantly better.
  4. Devote enough time to the process. This client apparently complained that she didn't have time to read and understand what she was asked to sign. But when you are retired, managing your retirement finances has to be near the top of your priority list.
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