My review of C Thomas Thames continued...

All of this annuity switching raises obvious questions. 1) Why couldn’t Tom make up his mind on the first try? and 2) Did Tom Thames indeed stand to gain financially in some way(s) by calling for any/all of these annuity switches, and IF so might THESE (financial gains) have been the TRUE reasons why he called for these switches? When Tom was my adviser he NEVER said anything about what commissions or “trailer fees” he may or may not have stood to earn. I can only guess. According to Wikipedia, financial professionals may earn high commissions (and possibly trailer fees) when selling annuity products. There are many other Internet articles about LAVISH commissions and trailer fees that brokers may earn when selling annuities. Respected investment expert and syndicated radio host Ric Edelman is constantly warning investors that annuities are one of the most expensive of all investment products, they are illiquid, they lack stepped up cost basis for beneficiaries, they are taxed at a higher rate than normal investments like stock and bond ETF's, etc, etc.

For anyone who wants to learn more about annuities and brokers in general, here is some suggested reading, especially the 2nd to last paragraph: Newsweek article

And while I was sold variable annuities by Tom, indexed, fixed, immediate and other annuities are inferior financial products as well. CLICK HERE for details.

Since cutting off ties with C. Thomas Thames years ago, the residual effect of Tom’s "advice" continues, as I have ALSO paid enormously HIGH "ordinary income" tax rates and "withholding" taxes on SEVERAL occasions. It's not just the 10% Federal tax that brokers only tell you about. It's much more! Every day that my savings is stuck (under threat of exorbitantly higher taxation) in these last two annuities I am reminded of Tom Thames. Even after you turn age 59 1/2 the higher "ordinary income" tax rate continues. Had I just remained in normal investments like stocks (which Tom wanted me to sell off) I would have enjoyed only paying the normal "capital gains" tax rate on gains. Also the last annuities that Tom sold me had enormous fees and expenses of over 3% per year. Again, annuities are one of the most expensive of all financial products. That's what Tom was peddling.


Based on the critical fact that annuities have no stepped up cost basis, I don't believe that Tom gave much of any concern to my estate preservation when he recommended that I invest huge amounts of my savings into annuities. Stocks, bonds and index funds do have stepped up cost basis, meaning heirs pay no taxes on gains. Tom never mentioned any of this in conversation. Furthermore the cumulative effect of lost future revenue due to the multiple and massive surrender penalties that I paid from the get go has had a huge impact on my "estate preservation". Losing 1% per year can greatly effect returns over long periods of 20 to 30 years. It doesn't take a mathematician to understand that losing $59,000 in short order is devastating to long term returns! Also this higher taxation and the insurance company surrender fees that I paid represents money that would have compounded had it been invested in liquid investments rather than squandered due to Tom's recommendations to constantly switch annuities.

I have also recently learned that annuities are taxed at a much HIGHER “ordinary income” rate. Stocks, bonds and index funds enjoy the much lower capital gains tax rate. The so-called "tax advantage" of annuities is over stated. In fact in 2003 Wealth Manager published an article called "Photo Finish" (Archived URL). The author determined that annuities are generally NOT effective at tax deferral relative to other investments after all. And from my personal experience (what really matters) I can report that over the years I’ve been hammered by excessive withholding taxes and "ordinary income" taxation that is inherit to annuities. I WISH I had consulted with a tax accountant, unbiased registered investment adviser or attorney before (or after) trusting Thomas' recommendations to invest into these variable annuities. I found out the hard way that, when I withdrew money early from an annuity, I was taxed not once but THREE TIMES (10% federal withholding + state withholding + additional state and Federal “ordinary income” tax). I’ve read that statistically 25% of annuity investors withdraw money early, so it's fair to ask why would any adviser have a client dump huge amounts of their savings into an annuity in the first place??? I have had to withdraw money early on several occasions because Tom urged me to dump so much of my savings into these variable annuities. In retrospect I say that it is common sense that young people ESPECIALLY should never lock their money up in an “annuity prison” until age 59 1/2. Ric Edelman says that with investments you want to be able to liquidate at any time, for any reason, and without any penalty or cost. On a simple ethical level I say that I should have NEVER been sold ANY annuity in the first place because there is ABSOLUTELY NO WAY to predict whether one might need their money sometime in the next 30 + years, yet Tom was GUNG-HO about urging me to pour a huge percentage of my saving into variable annuities with little regard for the basic investment rule about not putting too much into any one investment. Yes a variable annuity's subfunds are diversified into many securities, but the annuity itself should be viewed as just one investment. In my case, the risk that did in fact come into play was very simple: The risk of Tom picking the "wrong" annuity time after time after time after time! Generally Tom recommended that I invest LARGE dollar amounts into just one annuity contract or just two annuity contracts at a time. In essence Tom recommended that I put WAY too many of my eggs in one "basket" and I paid the price in surrender charges as a result when Tom wanted to exchange a full 100% of each of the annuities that he called on me to surrender. In theory this most elementary investment strategy known as "diversification" BY ITSELF could have helped save me from Tom constantly and repeatedly picking the "wrong" annuity time after time. This simple, basic rule by itself could have GREATLY reduced the surrender charges that I paid when Tom kept changing his mind over and over again. Again I’m not even talking about “legal suitability” or other standards or duties in this review - I’m talking on a moral and common sense level. Isn’t that what a client would expect?

On average, annuities in general have very high management fees. Ric Edelman says that annuities are one of the most expensive of all investment products. The vast majority of these fees are also not even mentioned in the quarterly statements that the insurance company sends you! In fact the annuities that I remain invested in today only mention a little $30 annual administration fee, with NO mention of the high management fees in those quarterly statements. Totally deceptive of the insurance company! By the way index funds (which were first introduced in 1976) are extremely low cost and they are liquid.

My C Thomas Thames review doesn’t end with annuities. When Tom wasn't making extremely costly annuity surrendering recommendations, Tom simply had a knack for picking the wrong investments. Another investment that Tom said had “great promise” and I invested in on his advice and urging, lost about two thirds of it’s value in short order. Yet another, a limited partnership, ultimately ended in investor class action lawsuit against the company. I remember Tom telling me that this particular investment had "strong guarantees" and "low risk". Years later, after doing some research I have heard that limited partnerships in general are actually considered very risky and to the point that some brokerage houses flat out refuse to sell them.

It has taken years for me to reexamine everything and learn the details about what really happened. Back in the 90's I wish that I had known what annuities really were all about, in particular that annuities are NOT meant to be traded like stocks as C Thomas Thames kept constantly and repeatedly instructing. I also wish that I had consulted with an attorney and I wish that I had known that there are regulatory agencies that you can notify within 10 years to do an examination. All I can do now is release my review. Stories like mine should not and will not go untold because the people need to be educated about these various issues of public significance. All too often it's senior citizen investors who don't have the energy to tell their story, they're too embarrassed or they just die of old age, never getting a chance to tell their story. Fortunately I have plenty of energy and years left to exercise my free speech. Again I CHALLENGE any reader to completely ignore what I have said in this review and instead ask any unbiased registered investment adviser, lawyer or other expert about all of this annuity switching that went on (see table on the previous page). Ask them what the motivation would be for an investment professional to constantly change their mind and call for their client to switch variable annuities (which are not "trading vehicles") multiple times, and in large dollar amounts, all within short time spans. It should take them about 2 seconds to figure out what was going on. Among other things ask them if it's the clients fault for following such "investment advice" as Tom keeps insistently suggesting. That should draw a very wide eyed look!

With the best of intentions, and as someone who is not an accountant, financial planner or lawyer, I have provided supporting links to highly reputable outside websites that I believe are very helpful and educational. The reader can rest assured that I have very carefully reviewed my personal documents and statements to be as accurate as possible. For further confirmation of facts and figures listed in the table on page one, I have even requested and received confirmation letters (also posted on this site) from the insurance companies that issued my variable annuities. It is in fact documentation that is most important because documents are irrefutable. I continue to pour through paper work. I absolutely feel that I have a public duty to not just defend myself and my good reputation but to educate the public. I have a duty to protect the casual reader who may be led astray into possibly thinking that it is somehow acceptable or OK to constantly and repeatedly surrender variable annuities. It is not and it never was! Remember: Annuities are not trading vehicles. Contact an unbiased, fee-only fiduciary adviser to evaluate your situation if any "investment professional" anywhere ever tries to get you to quickly switch an annuity, actively managed mutual fund or other "non-trading vehicle". I also believe that have a duty to protect the casual reader from possibly being led to falsely believe that they somehow have no rights simply because they went along with an adviser's recommendations and those transactions have already taken place. That too couldn't be further from the truth. You absolutely do have rights! Brokers, advisers, and insurance agents are professionals who are and always were held accountable by various laws.

For me, my 20/20 hindsight came way too late. But I can at least educate others and continue the discussion about these issues of public significance. As an investor, my general advice to anyone is to never assume that an adviser who pitches investments to you is gonna have a conversation with you about critical information and/or is even giving sound advice or advice in your best interests. If they might have an assortment of certifications, or have been in business for decades, don't assume that you are getting sound recommendations. I say definitely don't assume that they are going to get you a better return than normal investments like index funds (ETF's) which I have been reading are consistently outperforming professionally managed funds (actively managed mutual funds). Again I am not an adviser giving personalized advice. I am just repeating what experts are consistently talking about in the financial world with regard to ETF's. Hire a fee-only fiduciary adviser to scrutinize everything before making financial decisions. Get a second opinion! It just might save you a LOT of money. It would have saved me a fortune.


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I am a former client of C Thomas Thames. Anyone with eyes can read that this site is about my review of C Thomas Thames, the investments he sold me and a discussion about various other issues of public debate. Tom has made the laughable assertion that someone might, I would presume, be confused into thinking that this site is run by Tom himself or his business Thames Financial and Insurance Services, run by a registered investment advisor, or provides personalized investment advice, which is utter nonsense. It is obvious to anyone that the content offered herein is not personalized recommendations to buy, sell or hold securities, and any content on this site does not constitute individual investment, legal, tax or other professional advice. As they say, always consult with an objective registered investment adviser before making financial decisions. This goes without saying.

© 2012