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Financial Advisor And Insurance Agent, Richard Wesselt, Barred From The Securities Industry By FINRA For Sales Practices Violations

The Wolper Law Firm is currently representing clients of Richard Wesselt, a Financial Advisor and insurance agent, in Collegeville, Pennsylvania. Each of the customers have complained that Richard Wesselt “oversold” insurance products and recommended, as part of an overall investment strategy, that the clients borrow against the cash value of those policies to meet personal expenses and/or finance the insurance premium payments of additional policies. Richard Wesselt recommended this strategy as part of what he described as the “infinite banking” model designed to accrue retirement savings. Many of these clients could not afford the insurance policies and the policies either lapsed or were terminated due to high premiums. Moreover, the clients were often recommended to use qualified retirement savings to fund the insurance premiums, which caused additional damage. 

The Wolper Law Firm has filed arbitration claims against Richard Wesselt and his employing brokerage firms based on this alleged misconduct, seeking compensatory damages and a return of premiums paid. 

On November 9, 2020, Fthe Financial Industry Regulatory (FINRA) imposed a permanent bar on Richard Wesselt, precluding him from associating with any FINRA member.

According to the FINRA sanction:

“Without admitting or denying the findings, Wesselt consented to the sanction and to the entry of findings that he made unsuitable recommendations that customers purchase a variable annuity. The findings stated that these recommendations were inconsistent with the customers’ investment profiles, including their time horizon, liquidity needs, and risk tolerance. Wesselt’s recommended investment strategy generally involved three steps. First, Wesselt recommended that his customers liquidate their retirement savings, which they often held in qualified, tax-deferred accounts such as 401(k)s or IRAs. As a result, these customers lost benefits associated with their 401(k)s, including services such as access to investment advice, telephone help lines, educational materials and workshops. Next, Wesselt recommended that customers purchase a variable annuity with funds liquidated from their retirement plans. Finally, after the variable annuity was issued, Wesselt recommended customers take early withdrawals, causing customers to lose benefits associated with the variable annuity and incur surrender charges. These unsuitable recommendations caused the customers to incur surrender charges of $378,452. The customers were subjected to costly fees and penalties, forfeiture of expected benefits, lapsed or cancelled policies, and the depletion or complete loss of their retirement savings. Wesselt, by contrast, earned commissions of $686,025 from the sale of the variable annuities. The findings also stated that, at Wesselt’s direction, employees in his office engaged in a practice of obtaining customer signatures on blank or incomplete forms. The forms included, among others, new account agreements and variable annuity withdrawal request forms. Wesselt directed his staff to send or provide partial documents or forms, or signature pages, to customers with instructions to sign and return the document. The forms were then completed by Wesselt or his staff and submitted to the member firm or the variable annuity company for processing. As a result of this practice, many of Wesselt’s customers did not have the opportunity to read important disclosures regarding their variable annuities, and thus were unaware of the features, costs, and risks associated with these products. Similarly, blank variable annuity withdrawal forms provided no information about the amount of the withdrawal, the withholding of taxes, or surrender fees. The findings also included that, by directing his employees to have customers sign blank or incomplete forms, Wesselt caused the firm to create and maintain inaccurate books and records.”

For a copy of the FINRA Sanction, click here

Richard Wesselt has been in the securities industry since 1992. He is currently registered with Fortune Financial Services and was previously registered with Sterne Agee Financial Services and O.N. Equity Sales Co. Separately, Richard Wesselt is an appointed insurance agent for various insurance companies. For many years, upon information and belief, he was one of the top producing insurance agents for Ohio National Life Insurance Co.

Whole life insurance is a form of permanent life insurance that offers a savings component that accumulates in the form of “cash value.” Over the life of the policy, the accrued cash value of a whole life policy can be withdrawn, borrowed against, or left within the policy to pay future premiums.

Whole life insurance premiums are more expensive than term-life or variable/universal policies but generally provide a fixed rate of return for the insured. Most insurance agents recommend that clients leave the accrued cash value in their whole life policies to pay premiums for that policy so that the policy eventually becomes self-sustaining. In other words, at a pre-defined date, the insured will no longer need to pay monthly or annual premiums as the accrued cash value will be sufficient to cover those payments.

Borrowing against whole life insurance policies jeopardizes the entire policy and a recommendation to do so may constitute negligence, a breach of fiduciary duty or, in certain circumstances, a misrepresentation. Because whole life policies are designed to become self-sustaining, if an insured withdraws the accrued cash value, he or she will need to continue paying the above-average premiums in order to maintain the policy. This creates two problems. One, the cost of insurance becomes exceedingly high because the insured will need to spend more money out-of-pocket to sustain the policy. Over time, many insured determine that the cost of whole life insurance is too high and, if there is insufficient cash value to pay premiums, allow the policy to lapse; thus wasting all of the premium paid until that point. Two, in the event an insured allows a whole life policy to lapse, the loans taken against the policy become taxable. Many insured are not aware of this consequence.

Whole life policies are extremely profitable for Financial Advisors who recommend them. Often times, insurance companies pay the insurance agent 90% of the first-year premium plus a trailing commission of 5% of annual premiums thereafter. Unfortunately, commissions often become the driving force behind insurance recommendations.

Clients of Richard Wesselt who have contacted the Wolper Law Firm have all alleged that Richard Wesselt recommended an unsuitable number of whole life insurance policies and encouraged them to borrow against each policy to purchase new policies. The whole life insurance policies are now encumbered to the point where the cost of insurance has become disproportionate in relation to the economic benefit of having the policies.

These complaints against Richard Wesselt are not isolated. According to public records released by the Financial Industry Regulatory Authority (FINRA), Richard Wesselt has been the subject of fourteen customer complaints, alleging sales practice misconduct. Among the complaints against Richard Wesselt include the following:

September 2020—“Customers allege representative Wesselt misrepresented the sale of life insurance to build wealth for retirement and college funding.”
• September 2020—”Customer alleges Richard Wesselt failed to provide necessary fiduciary and professional guidance regarding insurance and variable annuity investments.” Alleged damages are $500,000 and the matter remains pending.
• April 2020—Unsuitable investment and strategy recommendations.” Alleged damages are $500,000 and the matter remains pending.
• March 2019—”Unsuitable investment recommendations, investment strategy and misrepresentations and omissions.” Alleged damages are $350,000 and the matter remains pending.
• February 2019—”Unsuitable investment recommendations, investment strategy and misrepresentations and omissions.” Alleged damages are $220,000 and the matter remains pending.
• January 2019—Customer “alleges Mr. Wesselt engaged in unsuitable sales of insurance an annuities.” Alleged damages of $750,000 and the matter remains pending.
• June 2018—”Customer alleges unsuitable investment recommendations and misrepresentation.” Alleged damages are $400,000 and the matter remains pending.
• October 2018—”Claimant alleges unsuitable investment recommendations, deceptive and unfair trade practices.” Alleged damages are $300,000 and the matter remains pending.
• August 2017—“Customer alleges sale of variable annuity was not suitable.” The matter was settled for $25,674.
• March 2017—“Customer alleges rep negligently sold unsuitable products in violation of his fiduciary duty.” The matter was settled for $15,000.
• August 2016—“Customer alleges sale of variable annuity and life insurance were unsuitable.” The matter was settled for $24,257

For a copy of Richard Wesselt’s CRD, click here.

Financial advisors have a legal and regulatory obligation to recommend only suitable investments/insurance strategies that are appropriate for their clients’ needs and objectives. Their employing brokerage firm and insurance principal have a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at mwolper@wolperlawfirm.com.

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