What Happens After a Bank Rips Off Your Grandmother?

A bank annuity salesperson snatches most of Grandmother's money, creating a "disaster" for grandma. Things couldn't get worse, right?

Wrong. Another bank annuity salesperson tries to rip off Mother!

This story, told by Jeff D. Opdyke in his Sunday Journal column, is so sad, and so maddening, that we'll show it to you in full:

More than a year ago, I wrote about my grandmother buying an annuity from a local banker, noting that I viewed the transaction as a financial disaster. This banker persuaded my grandmother to lock up two-thirds of her liquid assets in an annuity.

Based on the contract details, the banker was clearly clueless. My grandmother had one request -- that the proceeds not go in a lump sum to her daughter -- and the banker told her that would be no problem. He was wrong: The contract specifically notes that the beneficiary, my mom, would receive a lump-sum payment upon my grandmother's death.

I told my grandmother that I wanted to help her try to nullify the contract, but she demurred. She has been dealing with this bank branch since the 1970s and didn't want to raise a stink. So I held my tongue.

However, something good arose from this sorry mess. As I wrote in that column, it's incumbent upon us to watch out for our parents and aging relatives when it comes to their big financial transactions. You must talk to them, tell them not to feel pressured by anyone and encourage them to call you before acting on any investment solicitation, particularly for an annuity.

And I'm happy to say my mom did just that.

She heard me talking to my grandmother, and she listened when I gave her the same message. A few months ago she received a large insurance settlement for a back injury, and when she deposited the check, the bank immediately sat her down with an in-house investment peddler who tried to persuade her to put the entire sum (essentially 100% of her liquid assets) into a variable annuity. It would have basically locked up her money for about a decade.

Mom called me from the banker's desk to tell me about what sounded like a great deal to her. I told her the risks and that in her situation it was a terrible idea. She hung up, but then called back when the banker's spiel continued. She put the banker on the phone, and I told him to back down because this annuity was entirely inappropriate for my mom's situation.

He lost the sale.

Just to be clear: I think that for certain people certain annuities can be great tools for retirement-income planning. I expect to use annuities in my retirement to create a pension-like stream of permanent income my wife and I can never outlive.

But that doesn't mean they're right for everyone, and the worst situation is when you find a parent has been sold an annuity that mangles her finances and leaves her feeling insecure.

Grandma's disaster is, of course, banking's disaster. People don't distinguish between bankers and in-bank brokers/insurance agents who sell on commission.

The salesperson with the fiduciary instincts of a mosquito, the stern loan officer and the nice lady in the trust department are equally "bankers" in the public's eyes.

Contest: In 300 words or less, discuss whether selling expensive, inappropriate deferred annuities to credulous senior citizens is in the best interests of a bank and promotes the bank's long-term success.

Prize for the best entry will depend on the quality of thought and expression.

A little repentance wouldn't hurt, either.