My father updated that their personal banker at their bank advised them to deposit a large sum of their assets in an annuity. They were told that the annuity would provide them 9% interest in income yearly (which still wouldn't cover their independent living facility expenses), but they would not have access to the principle, especially if (most likely when) they did not outlive the term of the annuity - handing over a large chunk of their assets to the bank.
The financial planner appointed by my parent's elder law attorney advised my parents against this annuity, that the banker has not taken their best interests into account.
Doing a quick Google search, I see many articles about the how annuities have become forms of elder abuse, particularly when the term length of the annuity is not revealed.
Is an annuity a legitimate income source for my parents, or are they being pushed something that is against their best interest?
My brother, who had sold annuities years ago, was livid when he found out our mom and sister had done this. He felt it was very unethical for the banker to sell such a long-term product to a woman almost in her 80's. But they never asked for his advise. I have also heard that the insurance companies that write and back these annuities sometimes go out of business before the maturity date...a good way to get out of paying the annuitant (or his heirs) back their money when the time comes. Lots of reasons to be wary of the annuity biz.
So I immediately came home and researched it. While my parents did OK with it, as soon as the annuity matured, we took that money and invested it in lower fee accounts. An annuity is an insurance product and only as good as the insurance company backing it up. It makes a big commission for the banker, so keep that in mind. Just do your homework!
Take others' advice - in this situation the annuity benefits the sales person, not your parents.
It's really disturbing to learn that some people are still trying to snare older people into investments that benefit the salesperson and not the elders. But there are always people who only care about what they can get from a situation.
There are SO-O many different types of annuities and many are so complicated I feel that sales people don't always understand what they are offering. And there are commissions to consider, as there are with ANY financial instrument. And that may shade the recommendation from the sales person.
The Bottom line? Without knowing what your Dad said his needs and objectives are, what every other source of income and assets are, and more about the specific proposal was I would not be able to fairly comment on your question. And, I don't think others on this site can give a fair assessment either.
As an aside, the bank would not benefit from an early death ---And your Dad would not be handing over a large chunk of money to the bank. The insurance company that issues the annuity would receive all of the money. Depending upon the type of annuity (Fixed, variable, immediate, deferred) and the terms and riders it would be unfair to brush this proposal as abuse or scam.
As always, a good bit of caution is needed in making investments --- personally too many senior fail to get competent family input for such investments. Even wise investors lose their edge as part of the aging process and investment products have surely become more complicated.
But seriously, the point that you made about this practice being unscrupulous really made me nervous for how vulnerable seniors are, even from a person working at a mainstream bank.
I would be in touch the the State Banking Commission and the State Attorney General about this bank and their practices. With a CC to the Better Business Bureau and the new Federal Consumer Protection Agency for good measure.
And maybe you could tell us which bank it is.