The action by the Office of the State Attorney General that will require John Hancock Life Insurance Co. and a subsidiary broker-dealer to refund Massachusetts seniors more than $550,000, and for the insurer to pay an additional $165,000 to the state, brings to a halt the career of a 35-year financial-services veteran who should probably have known better. In court documents, Hancock neither admitted nor denied the AGO’s allegations, except for admissions of the activities of the individuals cited in the documents.
The settlement outlined last month by the AG’s office alleges that James E. Moniz, who worked for Hancock subsidiary Signator Investors Inc., sold risky and unsuitable variable life insurance policies, variable annuities and other insurance and financial products, including long-term care policies, to seniors. The company terminated his employment on Oct. 25, 2013.
The settlement, documented in the assurance of discontinuance filed in state Superior Court by the Office of the Attorney General, states that Moniz associated with Daniel Matthews, a mortgage loan originator with Direct Finance Corp., to encourage senior clients to take out reverse mortgages and invest the proceeds in variable annuities and other risky financial products. The AG penalized John Hancock for failing to supervise Moniz’ marketing and sales practices, which included inducing senior clients to sign blank application, withdrawal and replacement forms. The AG’s office said John Hancock has cooperated throughout the investigation into the situation.
The Suffolk Superior Court filing requires John Hancock to make 145 additional refund and penalty waiver offers to the consumers who bought certain products from Moniz.
This is a repeat of the end of the last two stock booms we’ve had. Not only did the practice of buying stock on margin explode, but market novices also took cash out of their homes in the form of equity loans to get on board the stock rocket, figuring that home prices would always go up.
This time it’s different. Reverse mortgages target seniors aged 62 and up; for many cash-poor home-owning seniors, their home equity is their most significant asset. For those who still have savings, they’ve seen close to zero return since the beginning of the financial crisis.
Some of the products targeted in the Hancock settlement had significant surrender and withdrawal penalties, representing another cash drain for those seeking an early exit. Commissions on these products are paid up front. Early withdrawals result in a loss to the insurance companies selling the policy, so surrender charges in the 10 percent range are the norm. For affected seniors, the barber’s chair in which they’ll get their financial haircut is ready and waiting.
John Hancock will send letters to some of the consumers affected by Moniz’ actions, offering them refunds and penalty waiver offers. Let’s just hope that those letters don’t end up at the bottom of the pile, along with the come-ons for prepaid funeral help and medical insurance for which you can’t be turned down.
