March 12, 2025 • 25 mins
Are you aware of the complexities that can arise when you trust a financial advisor with your hard-earned money? This episode takes you on a journey through a riveting case of betrayal, where a financial advisor exploited the trust of a long-time client, leading to significant financial losses. As we dissect this story, we unveil the crucial lessons that can be learned from such disheartening incidents, emphasizing the importance of continuous involvement in your financial journey.
Navigating the world of investments can be daunting, and trusting the wrong person can have devastating consequences. We discuss the delicate nature of roles between financial advisors and trustees, emphasizing the red flags that should never be ignored. You’ll learn how to effectively separate these roles and why doing so is essential for your financial well-being.
Join the conversation where we share steps you can take to ensure your financial security, including the importance of regular checks on your investments, understanding the roles of fiduciaries, and the need for transparency in financial dealings. Protecting your future starts with being informed and vigilant.
Don’t wait until it’s too late to secure your wealth! Tune in, and be sure to subscribe for more insights on safeguarding your finances while navigating the often murky waters of financial advice. We’re committed to helping you make informed decisions—because no one cares about your financial well-being more than you do!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Bob Sewell (00:04):
Is that even legal?
It's a question we askourselves on a daily basis.
We ask it about our neighbors,we ask it about our elected
officials, we ask it about ourfamily and sometimes we ask it
to ourselves.
The law is complex and itimpacts everyone all the time,
and that's why we are here.
I'm attorney Bob Sewell andthis is season five of the
(00:26):
Worldwide Podcast that exploresthat one burning question.
Is that even legal?
Let's go.
Marshall Hunt (00:36):
Welcome to.
Is that Even Legal?
And today we're going to talkabout safeguarding your finances
, your estate and your peace ofmind.
I am Marshall Hunt, I'm in thehost chair today and I'm
actually going to beinterviewing the normal host,
bob Sewell.
How are you doing, bob?
Speaker 3 (00:53):
Hey, I'm doing well.
Thanks for taking over my job,yeah yeah.
Marshall Hunt (00:58):
So I thought this would be a good one for you to
sort of be the guest on, becauseyou and I were chatting about
different things in the news andwe saw this kind of sad news
story come through within thelast couple of weeks.
I'll kind of give some of thebackground and then maybe we can
talk about it and talk aboutways that people can use this
(01:21):
sad story to not fall into thesame trap.
So just a couple of weeks ago,yeah, arizona's Corporation
Commission, which regulatessecurities in Arizona, announced
that they'd awarded $1.1million in restitution and
(01:41):
another $150,000 inadministrative penalties against
a Mesa Arizona financialadvisor.
Like I said, it's a sad case.
The financial advisor had beena security sailman since 1987.
Had been a financial advisorsince 2007, so a long time.
Mar's, a married guy, lived inArizona since 1984.
(02:05):
And so this guy had a client,also a longtime Arizona resident
since at least the 1970s.
The client had sold a business.
The client had been runningthis business for more than 20
years and had an attorney helpthis client in the sale
transaction.
The attorney structured thetransaction in such a way that
(02:27):
the client was going to depositpart of the proceeds just under
a million dollars in acharitable remainder trust and
then the attorney recommendedthat this client find a
financial advisor.
It's not an uncommon story thatsomeone works for a long time.
They're a great businessman,they build up this business,
they decide they want to retire,they sell and all of a sudden
(02:50):
they got this big pot of moneythat they're not necessarily as
familiar with what to do with it.
So this guy does everythingright he has an attorney, he
gets a financial advisor, hegoes and meets with this
financial advisor.
They get along, they talk aboutinvestments and the client
agrees to put $830,000 into anannuity.
(03:10):
So you know, so far so good.
But this is like late 2007,early 2008.
So we're in great recessionterritory.
So we're in great recessionterritory and you know, I
haven't seen any of thereporting that this was
necessarily the reason why, butit's not hard to imagine that
(03:30):
you know someone in this casethe advisor, for whatever reason
, decides that he's going to dosome not good things and treat
this person's money as his own.
So this advisor was prettydevious.
He apparently first lied to hisemployer, so he was employed by
(03:50):
this securities broker and hesaid, hey, he told his employer
that this client was his uncleand he asked to be placed as the
trustee on this charitableremainder trust, um, and his
employer said, yeah, that's okay, you know, since he's your
uncle, we'll let you be the bethe trustee.
So that wasn't true.
(04:12):
He's, you know, has no relationto this client.
He then has access to theaccounts and, in particular,
this um uh annuity, and heproceeds to just drain the
annuity of all of its value andapparently eventually liquidates
it in 2016, after having takenlike $870,000 from this
(04:35):
charitable remainder trust.
And then it gets worse becausehe covers his tracks by creating
fake account statements showingthat the money was in fact
invested and growing.
And then the saddest part to meis apparently this goes on for
like 12 years, the advisor'smeeting with this client
quarterly.
They become kind of goodfriends.
(04:56):
They start to meet in theevenings over dinner.
They bring their wives they allknow each other and then, of
course, eventually you gotta paythe piper and one thing leads
to another.
The client gets wise in about2021, you know.
And then here we are today theadvisor's lost his license, he's
(05:20):
permanently barred, basically,from having securities licenses,
and now he's got this hugefinancial hit that he may or may
not ever be able to pay back.
So long sad story.
What I want to know from you,bob, is what can people do?
It seemed to me like thisclient kind of did everything
right.
They went to the professionals,they tried to rely on people
(05:44):
that were were licensed, butstill got in the hot water yeah,
first of all, that story isincredible to me.
Speaker 3 (05:53):
I mean, I don't, I don't know what goes through the
mind of this type of criminal.
I mean, are they really are?
Are they devious?
Are they just, you know, arethey sociopaths?
What goes through their mind?
How long do they think they canget away with this?
(06:14):
And I wouldn't be able to sleepat night if that happened to me
, I mean, if I did that tosomeone, and then much less if
it happened to me.
Yeah, they seem to be doingeverything right, but you know,
(06:37):
and I don't know if they couldhave taken extra precautions.
I mean, first of all, I'm goingto Monday morning quarterback
this, okay.
But the first thing that'sgoing through my head is how
this guy ends up being named asthe trustee and how any attorney
(07:01):
let that happen.
Any attorney let that happen.
And it could be that the guyjust changed up the paperwork.
The guy who did the evil deedshere just changed the paperwork
without even knowing, knew, likehis attorney, or the client
(07:25):
knew, that he was the trustee.
Then we have an issue.
Marshall Hunt (07:31):
What's the risk of having your financial advisor
also be a trustee.
On a trust like this.
Speaker 3 (07:37):
First of all, that should never happen.
Generally speaking, finra isnot going to allow that to
happen.
Most financial institutionswill not let the financial
advisor be the trustee.
There are different roles.
Let me explain.
A financial advisor is toadvise on how to invest and the
(08:02):
trustee is to advise on managingthe trust, and you generally
don't mix those two except underreally rare circumstances, and
those circumstances are going tobe.
I choose a financial advisor ata bank.
Excuse me, I choose a trusteeat a bank and that bank ends up
(08:25):
also managing the funds.
But I know a lot of financialinstitutions that keep them
separate, where they have thetrustee house on one side and
then they have the.
Marshall Hunt (08:41):
That was the case .
They only had an exception forfamily at this investment
institution, and that's theexception that this fraudster
apparently exploited.
Speaker 3 (08:54):
Exploited, yeah, but I mean, if the attorney had any
chance to interject himself intothat, he should have or could
have, or maybe it would havebeen the best thing.
I don't know.
I don't know enough facts aboutthat, but this is a you know a
story that if you're looking atneeding a trustee other than a
(09:21):
family member for a trust, don'tchoose your financial advisor
and I.
That just not their role.
It's not the way they think.
Financial advisors think aboutmaking money, making money for
themselves a lot of times, andthen the next thing is making
(09:42):
money for other people.
Now they you would think thatthey would be thinking the other
way.
If I make money for otherpeople, then I know people come
to me and I will make money.
It's just not in human nature,right?
So?
And so what I would do?
If I am a person who needs acharitable remainder trust and I
(10:07):
guess let me just say this Iwant to tell you what a
charitable remainder trust is.
First, a charitable remaindertrust is complicated.
These things are not foreverybody.
The IRS looks at them heavily.
Not for everybody.
(10:27):
The IRS looks at them heavily.
There's been a lot of chicanerywith charitable remainder
trusts, and so the IRS puts aheavy eye on these things and it
ties up your money.
You put your money in anirrevocable trust and, yes,
there's a lot of tax benefits toa charitable remainder trust
(10:50):
and you could have a guaranteedpayment.
If you do this right full.
If they are of a high net worth,a lot of people experience
negative consequences.
So this should be donecarefully, with the right person
(11:16):
, so that in mind you're nevergoing to choose your financial
advisor for the trustee.
Don't, don't, just don't.
If you need a professionalfiduciary, choose one.
And one of the advantages of aprofessional fiduciary is they
have bonds or they're backed bygiant financial institutions,
(11:38):
and so if someone does stealyour money, you can then sue
someone and collect it back.
So the and I and we see herethat this guy was part of a
financial institution kind of.
But that's not the wayprofessional fiduciaries work.
(11:59):
They're not working his realmand his way.
Professional fiduciary is likesomething like a bank and trust
and they'll have certain amountsof money under management and
then these people go out andthey manage people's monies
under these trusts.
Marshall Hunt (12:18):
Okay, so we separate the jobs of trustee and
say financial advisor.
What else should someone do tomake sure they're choosing the
right financial advisor?
You talked a little bit abouttrustees and you might look at a
institutional trustee that'sgoing to have a bond.
(12:41):
That you know is maybe in someinstances more likely to allow
you to avoid these type offraudulent behaviors.
But are there other thingspeople should be looking at?
You know, are financialadvisors licensed in some way?
Do you have any opinion aboutusing family, as either you know
(13:03):
, as a trustee?
What else can people do besidesseparating these roles to make
sure they make the right choice?
Speaker 3 (13:10):
Yeah, there's a lot of introspection that goes on
with estate planning, okay, anda lot of times we're not very
honest with ourselves about ourfamily.
But let's assume that we'rehonest with ourselves about who
our family members are and theirrelative intelligence, acumen
(13:35):
and truth-telling.
Choosing a family member is nota bad idea.
I mean to be the trustee.
They typically want to do theright thing.
If this is a really supercomplicated trust, you may not
want the family member, you maywant someone else, a
(13:57):
professional, and the reason is,let's say, that is a
complicated situation.
You have businesses that are inthe trust, or you have
complicated assets, or you havecomplicated distribution schemes
.
Your family member has to goand hire an attorney anyways,
(14:18):
and then you're paying theattorney to really do the work,
turning to really do the work.
So sometimes having someoneelse do it might be a benefit.
It depends on how much is atstake.
So and it's hard right, becausewhat you're doing is you're
planning for down the road, likewill this person be even around
(14:44):
at the time?
They need to assume the dutiesor do something in this trust
role, or trustee role.
Marshall Hunt (14:51):
I just got named as my my parents uh successor
trustee and in their trust and I, I have the same doubts about
people's ability to, you know,judge human nature that you were
just expressing.
I don't know if they shouldhave chosen you.
Speaker 3 (15:04):
I would choose you Marshall.
I would choose you Yep, youwould be my favorite son, just
so you know.
Marshall Hunt (15:10):
All right.
Hey, you know, I've met yourkids.
I don't know if I would saythat.
I don't know if I'm better thanEvan, but I will tell him.
Speaker 3 (15:19):
You said that next time I see him um okay yeah so,
but look at reputation, thecommunity, look at the ability
for that that institution thatyou're choosing um to survive.
Uh, interview people um findout if they hold the same types
(15:40):
of values in that institution.
You never can be too cautious.
Do your homework, be skeptical.
Marshall Hunt (15:50):
I know sometimes there are fee-only advisors or
advisors that get a percentagethat's invested.
The type of compensation thatadvisors get, I assume that
probably matters too.
Speaker 3 (16:07):
Compensation.
Yeah, that matters a lot andanyone who's ever worked as an
investment advisor knows that itcould just change your outlook
and the financial outlook if youdon't choose the right people.
(16:27):
You need to compare rates andto the extent you could lock in
a good rate with these people,you'll do it.
To the extent you can.
That is understandable theextent you can, and you know
that is understandable.
(16:48):
Generally, the big financialinstitutions or financial
institutions want a percentageof the of the estate as their
compensation and that could be agood thing.
It could be a bad thing.
When you're in that sweet spotof the amount of money under
management, you have not toomuch funds, not too little funds
(17:11):
.
When you're in that sweet spot,it could be a real bargain to
have it as a percentage.
When you're underfunded,there's not a huge trust.
They won't take it.
Those big financialinstitutions just simply won't
take your money.
(17:34):
They want to see more moneybefore they incur their
liability and they want to knowthat the work they're going to
do is going to be worth it,because they're going to work on
that percentage.
The work they're going to do isgoing to be worth it because
they're going to work on thatpercentage.
Now there's these hourlyinstitutions.
You pay them by the hour to dothe work and they'll take your
money, even if it's not atremendous amount, they'll take
(17:57):
your money typically and thenthey'll just use it until it's
gone.
And that has a benefit too.
So, for example, a lot offinancial institutions, when
they find out there's a businessinvolved or complicated real
estate or a lawsuit heavenforbid they'll say, yeah, come
(18:18):
back to us when you've resolvedall those issues and then we'll
take your money Resolve allthose issues and then we'll take
your money.
So, yeah, you need to really behonest about what you have, and
the hourly people willfrequently take it with some
sort of complication and thenthey bill by the hour.
Yeah.
Marshall Hunt (18:39):
Okay.
So I mean you've gone throughthe whole thing.
You've got your separatefinancial advisor, you got your
separate trustee.
You know you've done yourresearch based on the size of
your estate, you've chosen theright financial advisor.
You know, let's say, your, yourfavored son is your trustee,
(19:00):
and is there anything else thatyou think that the poor client
in our example that we gavecould have done to avoid
disaster?
Again, we're not trying toMonday morning quarterback them,
like you said.
It's just a sad story and itsounds like they did a lot of
things right, but with theknowledge of hindsight, anything
(19:23):
else you would have hoped thatthey would do.
Speaker 3 (19:27):
I would want to see those statements.
Apparently, that guy wasforging statements.
Look at those statements hard.
You know, bernie Madoff madefake statements for his clients
and that's how he was found out.
There's this guy out there.
(19:48):
He ended up crunching thenumbers on Bernie and saying you
know, his returns aren'tpossible.
This really didn't happen, andthat's eventually.
Someone listened to this guy orsomeone else who ended up
setting the ball into motion andthe house of cards fell.
(20:12):
And so, similarly, look atthose statements.
Do these appear legitimate?
Marshall Hunt (20:20):
I mean you think today you know every company has
some type of online portal Canyou get online and see the
statements for yourself?
You think that?
I don't know if that was alwaysthe case in 2007, when
apparently this issue that wetalked about started, but you'd
think that'd be a sort of trust,but verify option.
Speaker 3 (20:59):
Yeah, trust, but verify Right.
No one cares about your moneyas much as you do.
That's the facts.
No one advisor.
And even if they are amazing,you're going to put your eyes on
those statements and you'regoing to say are these really
the investments that are rightfor me?
And then go back and do someresearch and find out why or why
(21:21):
not, so you could haveintelligent conversations.
Marshall Hunt (21:26):
Yeah.
So last question for you you'rean estate litigator, you?
You know, are generally the onepeople come to after something
like this has happened andthey're trying to pick up the
pieces and see what they coulddo.
In your experience, someone'sbeen the victim of a serious
financial fraud like this.
Are they likely to be able torecover?
(21:49):
How does it usually go?
Speaker 3 (21:51):
Yeah, this is going to be really tough, right?
Um, and it's going to bemultifaceted litigation.
Uh, I don't know if we knowknow enough facts and know
whether or not they're going togoing to recover.
Uh, but I would be looking hardat all the professionals who
were involved in this andlooking hard at that financial
(22:15):
institution that was allowingthis to go on and watching the
$800,000 plus be dissipated in acharitable remainder trust.
I mean, the whole purpose of acharitable remainder trust is
that the assets there there'sassets there after the given
(22:38):
period of time has ended.
You typically look at a lifeexpectancy.
You typically look at a lifeexpectancy Say, Bob Sewell has a
life expectancy of 25 years andyou enter your complicated
formula in.
I'm not going to pretend that Ido these things, but you enter
a complicated formula in and youput your money in and you have
(23:02):
a schedule for taking money outwhere there's now a remainder
trust for the charity at the end.
Collect any attorney who mayhave advised for a non-relative
financial advisor to be thetrustee.
That seems like a no-brainertoo.
(23:43):
But unless that guy has assets,$1.1 million is going to be
hard to collect.
But fraudsters tend to spendtheir money.
I've seen they don't.
They're not savers.
If they were savers, they would.
They would they wouldn't needto be fraudsters.
Marshall Hunt (23:54):
So yeah, and apparently the fraud that took
place over the course of 12 13years.
Yeah, it's not like he was justsucking the money away.
In all likelihood, All right.
All right.
Well, we'll end on a bit of asad note there, and no one likes
to think about someone tryingto get all that money back.
But we hope for the best forthat client and hope for the
(24:16):
best for Bob here.
Thanks for being on and we'lllook forward to speaking again
soon.
Speaker 3 (24:23):
Thanks, Marshall.
Bob Sewell (24:36):
Thanks for listening to the podcast.
We'll look forward to speakingagain soon.
Thanks, Marshall.
Don't forget, as smart as wesound and as lovable as we are,
we are not your lawyers and weare not giving you legal advice.
But if you need some legaladvice, get some.
There are some great lawyersout there and we are always
ready to help.
See you next time.
Is that even legal?
It's a question we askourselves on a daily basis.
We ask it about our neighbors,we ask it about our elected
officials, we ask it about ourfamily and sometimes we ask it
to ourselves.
The law is complex and itimpacts everyone all the time,
and that's why we are here.
I'm attorney Bob Sewell andthis is season five of the
(00:26):
Worldwide Podcast that exploresthat one burning question.
Is that even legal?
Let's go.
Marshall Hunt (00:36):
Welcome to.
Is that Even Legal?
And today we're going to talkabout safeguarding your finances
, your estate and your peace ofmind.
I am Marshall Hunt, I'm in thehost chair today and I'm
actually going to beinterviewing the normal host,
bob Sewell.
How are you doing, bob?
Speaker 3 (00:53):
Hey, I'm doing well.
Thanks for taking over my job,yeah yeah.
Marshall Hunt (00:58):
So I thought this would be a good one for you to
sort of be the guest on, becauseyou and I were chatting about
different things in the news andwe saw this kind of sad news
story come through within thelast couple of weeks.
I'll kind of give some of thebackground and then maybe we can
talk about it and talk aboutways that people can use this
(01:21):
sad story to not fall into thesame trap.
So just a couple of weeks ago,yeah, arizona's Corporation
Commission, which regulatessecurities in Arizona, announced
that they'd awarded $1.1million in restitution and
(01:41):
another $150,000 inadministrative penalties against
a Mesa Arizona financialadvisor.
Like I said, it's a sad case.
The financial advisor had beena security sailman since 1987.
Had been a financial advisorsince 2007, so a long time.
Mar's, a married guy, lived inArizona since 1984.
(02:05):
And so this guy had a client,also a longtime Arizona resident
since at least the 1970s.
The client had sold a business.
The client had been runningthis business for more than 20
years and had an attorney helpthis client in the sale
transaction.
The attorney structured thetransaction in such a way that
(02:27):
the client was going to depositpart of the proceeds just under
a million dollars in acharitable remainder trust and
then the attorney recommendedthat this client find a
financial advisor.
It's not an uncommon story thatsomeone works for a long time.
They're a great businessman,they build up this business,
they decide they want to retire,they sell and all of a sudden
(02:50):
they got this big pot of moneythat they're not necessarily as
familiar with what to do with it.
So this guy does everythingright he has an attorney, he
gets a financial advisor, hegoes and meets with this
financial advisor.
They get along, they talk aboutinvestments and the client
agrees to put $830,000 into anannuity.
(03:10):
So you know, so far so good.
But this is like late 2007,early 2008.
So we're in great recessionterritory.
So we're in great recessionterritory and you know, I
haven't seen any of thereporting that this was
necessarily the reason why, butit's not hard to imagine that
(03:30):
you know someone in this casethe advisor, for whatever reason
, decides that he's going to dosome not good things and treat
this person's money as his own.
So this advisor was prettydevious.
He apparently first lied to hisemployer, so he was employed by
(03:50):
this securities broker and hesaid, hey, he told his employer
that this client was his uncleand he asked to be placed as the
trustee on this charitableremainder trust, um, and his
employer said, yeah, that's okay, you know, since he's your
uncle, we'll let you be the bethe trustee.
So that wasn't true.
(04:12):
He's, you know, has no relationto this client.
He then has access to theaccounts and, in particular,
this um uh annuity, and heproceeds to just drain the
annuity of all of its value andapparently eventually liquidates
it in 2016, after having takenlike $870,000 from this
(04:35):
charitable remainder trust.
And then it gets worse becausehe covers his tracks by creating
fake account statements showingthat the money was in fact
invested and growing.
And then the saddest part to meis apparently this goes on for
like 12 years, the advisor'smeeting with this client
quarterly.
They become kind of goodfriends.
(04:56):
They start to meet in theevenings over dinner.
They bring their wives they allknow each other and then, of
course, eventually you gotta paythe piper and one thing leads
to another.
The client gets wise in about2021, you know.
And then here we are today theadvisor's lost his license, he's
(05:20):
permanently barred, basically,from having securities licenses,
and now he's got this hugefinancial hit that he may or may
not ever be able to pay back.
So long sad story.
What I want to know from you,bob, is what can people do?
It seemed to me like thisclient kind of did everything
right.
They went to the professionals,they tried to rely on people
(05:44):
that were were licensed, butstill got in the hot water yeah,
first of all, that story isincredible to me.
Speaker 3 (05:53):
I mean, I don't, I don't know what goes through the
mind of this type of criminal.
I mean, are they really are?
Are they devious?
Are they just, you know, arethey sociopaths?
What goes through their mind?
How long do they think they canget away with this?
(06:14):
And I wouldn't be able to sleepat night if that happened to me
, I mean, if I did that tosomeone, and then much less if
it happened to me.
Yeah, they seem to be doingeverything right, but you know,
(06:37):
and I don't know if they couldhave taken extra precautions.
I mean, first of all, I'm goingto Monday morning quarterback
this, okay.
But the first thing that'sgoing through my head is how
this guy ends up being named asthe trustee and how any attorney
(07:01):
let that happen.
Any attorney let that happen.
And it could be that the guyjust changed up the paperwork.
The guy who did the evil deedshere just changed the paperwork
without even knowing, knew, likehis attorney, or the client
(07:25):
knew, that he was the trustee.
Then we have an issue.
Marshall Hunt (07:31):
What's the risk of having your financial advisor
also be a trustee.
On a trust like this.
Speaker 3 (07:37):
First of all, that should never happen.
Generally speaking, finra isnot going to allow that to
happen.
Most financial institutionswill not let the financial
advisor be the trustee.
There are different roles.
Let me explain.
A financial advisor is toadvise on how to invest and the
(08:02):
trustee is to advise on managingthe trust, and you generally
don't mix those two except underreally rare circumstances, and
those circumstances are going tobe.
I choose a financial advisor ata bank.
Excuse me, I choose a trusteeat a bank and that bank ends up
(08:25):
also managing the funds.
But I know a lot of financialinstitutions that keep them
separate, where they have thetrustee house on one side and
then they have the.
Marshall Hunt (08:41):
That was the case .
They only had an exception forfamily at this investment
institution, and that's theexception that this fraudster
apparently exploited.
Speaker 3 (08:54):
Exploited, yeah, but I mean, if the attorney had any
chance to interject himself intothat, he should have or could
have, or maybe it would havebeen the best thing.
I don't know.
I don't know enough facts aboutthat, but this is a you know a
story that if you're looking atneeding a trustee other than a
(09:21):
family member for a trust, don'tchoose your financial advisor
and I.
That just not their role.
It's not the way they think.
Financial advisors think aboutmaking money, making money for
themselves a lot of times, andthen the next thing is making
(09:42):
money for other people.
Now they you would think thatthey would be thinking the other
way.
If I make money for otherpeople, then I know people come
to me and I will make money.
It's just not in human nature,right?
So?
And so what I would do?
If I am a person who needs acharitable remainder trust and I
(10:07):
guess let me just say this Iwant to tell you what a
charitable remainder trust is.
First, a charitable remaindertrust is complicated.
These things are not foreverybody.
The IRS looks at them heavily.
Not for everybody.
(10:27):
The IRS looks at them heavily.
There's been a lot of chicanerywith charitable remainder
trusts, and so the IRS puts aheavy eye on these things and it
ties up your money.
You put your money in anirrevocable trust and, yes,
there's a lot of tax benefits toa charitable remainder trust
(10:50):
and you could have a guaranteedpayment.
If you do this right full.
If they are of a high net worth,a lot of people experience
negative consequences.
So this should be donecarefully, with the right person
(11:16):
, so that in mind you're nevergoing to choose your financial
advisor for the trustee.
Don't, don't, just don't.
If you need a professionalfiduciary, choose one.
And one of the advantages of aprofessional fiduciary is they
have bonds or they're backed bygiant financial institutions,
(11:38):
and so if someone does stealyour money, you can then sue
someone and collect it back.
So the and I and we see herethat this guy was part of a
financial institution kind of.
But that's not the wayprofessional fiduciaries work.
(11:59):
They're not working his realmand his way.
Professional fiduciary is likesomething like a bank and trust
and they'll have certain amountsof money under management and
then these people go out andthey manage people's monies
under these trusts.
Marshall Hunt (12:18):
Okay, so we separate the jobs of trustee and
say financial advisor.
What else should someone do tomake sure they're choosing the
right financial advisor?
You talked a little bit abouttrustees and you might look at a
institutional trustee that'sgoing to have a bond.
(12:41):
That you know is maybe in someinstances more likely to allow
you to avoid these type offraudulent behaviors.
But are there other thingspeople should be looking at?
You know, are financialadvisors licensed in some way?
Do you have any opinion aboutusing family, as either you know
(13:03):
, as a trustee?
What else can people do besidesseparating these roles to make
sure they make the right choice?
Speaker 3 (13:10):
Yeah, there's a lot of introspection that goes on
with estate planning, okay, anda lot of times we're not very
honest with ourselves about ourfamily.
But let's assume that we'rehonest with ourselves about who
our family members are and theirrelative intelligence, acumen
(13:35):
and truth-telling.
Choosing a family member is nota bad idea.
I mean to be the trustee.
They typically want to do theright thing.
If this is a really supercomplicated trust, you may not
want the family member, you maywant someone else, a
(13:57):
professional, and the reason is,let's say, that is a
complicated situation.
You have businesses that are inthe trust, or you have
complicated assets, or you havecomplicated distribution schemes
.
Your family member has to goand hire an attorney anyways,
(14:18):
and then you're paying theattorney to really do the work,
turning to really do the work.
So sometimes having someoneelse do it might be a benefit.
It depends on how much is atstake.
So and it's hard right, becausewhat you're doing is you're
planning for down the road, likewill this person be even around
(14:44):
at the time?
They need to assume the dutiesor do something in this trust
role, or trustee role.
Marshall Hunt (14:51):
I just got named as my my parents uh successor
trustee and in their trust and I, I have the same doubts about
people's ability to, you know,judge human nature that you were
just expressing.
I don't know if they shouldhave chosen you.
Speaker 3 (15:04):
I would choose you Marshall.
I would choose you Yep, youwould be my favorite son, just
so you know.
Marshall Hunt (15:10):
All right.
Hey, you know, I've met yourkids.
I don't know if I would saythat.
I don't know if I'm better thanEvan, but I will tell him.
Speaker 3 (15:19):
You said that next time I see him um okay yeah so,
but look at reputation, thecommunity, look at the ability
for that that institution thatyou're choosing um to survive.
Uh, interview people um findout if they hold the same types
(15:40):
of values in that institution.
You never can be too cautious.
Do your homework, be skeptical.
Marshall Hunt (15:50):
I know sometimes there are fee-only advisors or
advisors that get a percentagethat's invested.
The type of compensation thatadvisors get, I assume that
probably matters too.
Speaker 3 (16:07):
Compensation.
Yeah, that matters a lot andanyone who's ever worked as an
investment advisor knows that itcould just change your outlook
and the financial outlook if youdon't choose the right people.
(16:27):
You need to compare rates andto the extent you could lock in
a good rate with these people,you'll do it.
To the extent you can.
That is understandable theextent you can, and you know
that is understandable.
(16:48):
Generally, the big financialinstitutions or financial
institutions want a percentageof the of the estate as their
compensation and that could be agood thing.
It could be a bad thing.
When you're in that sweet spotof the amount of money under
management, you have not toomuch funds, not too little funds
(17:11):
.
When you're in that sweet spot,it could be a real bargain to
have it as a percentage.
When you're underfunded,there's not a huge trust.
They won't take it.
Those big financialinstitutions just simply won't
take your money.
(17:34):
They want to see more moneybefore they incur their
liability and they want to knowthat the work they're going to
do is going to be worth it,because they're going to work on
that percentage.
The work they're going to do isgoing to be worth it because
they're going to work on thatpercentage.
Now there's these hourlyinstitutions.
You pay them by the hour to dothe work and they'll take your
money, even if it's not atremendous amount, they'll take
(17:57):
your money typically and thenthey'll just use it until it's
gone.
And that has a benefit too.
So, for example, a lot offinancial institutions, when
they find out there's a businessinvolved or complicated real
estate or a lawsuit heavenforbid they'll say, yeah, come
(18:18):
back to us when you've resolvedall those issues and then we'll
take your money Resolve allthose issues and then we'll take
your money.
So, yeah, you need to really behonest about what you have, and
the hourly people willfrequently take it with some
sort of complication and thenthey bill by the hour.
Yeah.
Marshall Hunt (18:39):
Okay.
So I mean you've gone throughthe whole thing.
You've got your separatefinancial advisor, you got your
separate trustee.
You know you've done yourresearch based on the size of
your estate, you've chosen theright financial advisor.
You know, let's say, your, yourfavored son is your trustee,
(19:00):
and is there anything else thatyou think that the poor client
in our example that we gavecould have done to avoid
disaster?
Again, we're not trying toMonday morning quarterback them,
like you said.
It's just a sad story and itsounds like they did a lot of
things right, but with theknowledge of hindsight, anything
(19:23):
else you would have hoped thatthey would do.
Speaker 3 (19:27):
I would want to see those statements.
Apparently, that guy wasforging statements.
Look at those statements hard.
You know, bernie Madoff madefake statements for his clients
and that's how he was found out.
There's this guy out there.
(19:48):
He ended up crunching thenumbers on Bernie and saying you
know, his returns aren'tpossible.
This really didn't happen, andthat's eventually.
Someone listened to this guy orsomeone else who ended up
setting the ball into motion andthe house of cards fell.
(20:12):
And so, similarly, look atthose statements.
Do these appear legitimate?
Marshall Hunt (20:20):
I mean you think today you know every company has
some type of online portal Canyou get online and see the
statements for yourself?
You think that?
I don't know if that was alwaysthe case in 2007, when
apparently this issue that wetalked about started, but you'd
think that'd be a sort of trust,but verify option.
Speaker 3 (20:59):
Yeah, trust, but verify Right.
No one cares about your moneyas much as you do.
That's the facts.
No one advisor.
And even if they are amazing,you're going to put your eyes on
those statements and you'regoing to say are these really
the investments that are rightfor me?
And then go back and do someresearch and find out why or why
(21:21):
not, so you could haveintelligent conversations.
Marshall Hunt (21:26):
Yeah.
So last question for you you'rean estate litigator, you?
You know, are generally the onepeople come to after something
like this has happened andthey're trying to pick up the
pieces and see what they coulddo.
In your experience, someone'sbeen the victim of a serious
financial fraud like this.
Are they likely to be able torecover?
(21:49):
How does it usually go?
Speaker 3 (21:51):
Yeah, this is going to be really tough, right?
Um, and it's going to bemultifaceted litigation.
Uh, I don't know if we knowknow enough facts and know
whether or not they're going togoing to recover.
Uh, but I would be looking hardat all the professionals who
were involved in this andlooking hard at that financial
(22:15):
institution that was allowingthis to go on and watching the
$800,000 plus be dissipated in acharitable remainder trust.
I mean, the whole purpose of acharitable remainder trust is
that the assets there there'sassets there after the given
(22:38):
period of time has ended.
You typically look at a lifeexpectancy.
You typically look at a lifeexpectancy Say, Bob Sewell has a
life expectancy of 25 years andyou enter your complicated
formula in.
I'm not going to pretend that Ido these things, but you enter
a complicated formula in and youput your money in and you have
(23:02):
a schedule for taking money outwhere there's now a remainder
trust for the charity at the end.
Collect any attorney who mayhave advised for a non-relative
financial advisor to be thetrustee.
That seems like a no-brainertoo.
(23:43):
But unless that guy has assets,$1.1 million is going to be
hard to collect.
But fraudsters tend to spendtheir money.
I've seen they don't.
They're not savers.
If they were savers, they would.
They would they wouldn't needto be fraudsters.
Marshall Hunt (23:54):
So yeah, and apparently the fraud that took
place over the course of 12 13years.
Yeah, it's not like he was justsucking the money away.
In all likelihood, All right.
All right.
Well, we'll end on a bit of asad note there, and no one likes
to think about someone tryingto get all that money back.
But we hope for the best forthat client and hope for the
(24:16):
best for Bob here.
Thanks for being on and we'lllook forward to speaking again
soon.
Speaker 3 (24:23):
Thanks, Marshall.
Bob Sewell (24:36):
Thanks for listening to the podcast.
We'll look forward to speakingagain soon.
Thanks, Marshall.
Don't forget, as smart as wesound and as lovable as we are,
we are not your lawyers and weare not giving you legal advice.
But if you need some legaladvice, get some.
There are some great lawyersout there and we are always
ready to help.
See you next time.
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