All Kinds Of Investment Scandals And Scams
Author: King Herring
We humans are as creative on the "Dark Side" of commercial activity as we are in developing beneficial new products and services. In
the face of huge financial benefits, however, some corporate executives can't resist taking an extra dessert even before their
shareholders have finished dinner. Some scandals have more of an impact on investors than others, and most produce unwarranted
layers of government regulation and control that stifle honest creativity.
Plain vanilla fraud and theft are less worrisome to me than situations where the general acceptance of misinformation or "business as
usual" practices allows inherently bad product ideas and blatant mismanagement to become accepted by regulatory authorities,
financial professionals, and myopically gullible consumers. Here are some candidates for future "Blockbuster Scandal Awards" (B S
Awards, if you will): Variable Life Insurance & Annuities, Wrap Fee Managed Investment Accounts, Portfolio Window Dressing, Asset
Allocation Mutual Funds, and Obscene Executive Compensation.
1) Variable Insurance and Annuities: Variable products are a relatively new thing in the insurance industry, circa 1980 or so. Before that,
the conventional wisdom labeled the Shock Market much too risky for Life Insurance Policy and Annuity Contract guaranteed benefits. In
fact, these benefits had been "guaranteed" for so long that it became a generic expectation of anyone in the market for either. So why
did the State Insurance departments cave in to the Variable Product lobby? And what is not emphasized as these products are
marketed to potential insureds and annuitants?
As if the 8% sales commission on Straight Life Annuities wasn't enough, the addition of Mutual Fund bonuses made the Variable Annuity
irresistible... to financial professionals. Similarly, this product is so lucrative for the companies that they manipulate their rates to become
more competitive. Since the introduction of variable benefits, there have been m