AndyNZ

I’m still curious about why there is a judge involved in the first place. Most financial transactions don’t require a judge to intervene, particularly in the beginning.  Why the judge wants the client to talk to a financial professional seems pretty key to understanding whether what you are doing is ethical.  Ethics is different from legality. Legality means you complied with the law as it is recorded (i.e. obey the letter of the law).  Ethics includes things like understanding the intention and a best effort to meet those intentions in an honest and forthright manner.
Perhaps you can’t say because of confidentiality requirements, which I can understand, but it also seems to be pretty relevant to us giving you a reliable answer.
Is this because the bank is trying to roll up a legal judgement into a lump sum and the judge wants to be sure the client is getting the full amount?  I guess that would explain why the client would want a low interest rate rather than a high one.

hw0799

You need to understand the intent of the order given by the judge. Please don’t get me wrong but it almost sounds like that there’s a legal requirement that the client (not your friend, not the bank he’s working for) must discuss the investment with a financial professional (or planner) so that the client is NOT disadvantaged by the investment (if you want the CFAI terminology it’s standard III C Suitability of investments). Essentially the court (or the judge) is exercising a fiduciary role which does indeed extend to the financial professional or planner whatever you want to call the person.
I’m not sure about the case here, but some trust funds require that the beneficiary file an application before funds can be cleared to be withdrawn. A judge may get involved when there’s a dispute or even as a standard procedure in some states.
Now it appears that for some reason the client is not consulting an independent financial planner; perhaps the client’s not savvy enough or the bank or your friend has persuaded the client to use the “knowledgeable financial planner” that they can recommend a.k.a YOU. If that’s the case, your friend or the bank he works for MAY BE ”working around” the legal requirement by hiring you on behalf of the client to validate the price of the annuity which may NOT be the only “intent” of the judge’s order.
Further if the bank has any vested interest in the annuity business, you must definitely disclose that you are being paid by the bank for validating the price of the annuity to the client (my recommendation is you should disclose it anyway).
There’s still the issue of the suitability of the investment which has not been judged in the context of the client’s total portfolio and objectives and constraints. Presumably you do not have access to such information - you may not even be speaking to the client directly.
Who is supposed to judge the suitability of the investment? Most likely the client’s financial planner. But the client doesn’t have one (this seemed like a logical assumption - correct me if I’m wrong). This means the bank is using your name to “work around” the legal requirement, they are using your name as a proxy for the “financial planner” of the client who’s intended to advise not just on the present value of the annuity but on the suitablility of the investement. Seems like a very slippery slope to me.
Sorry I don’t mean to be negative - for all I know the product’s great, it all works out well and the client is happy but what if it DOESN’T?
Remember that your name is on the line and the client’s money is on the line.

eoin

if you are not licenced to sell insurance I don’t know why you would be considered an expert in the suitablity of the product.
I don’t think the judge is asking for someone to double check the math on the annuity

Rasec

Ah people, let the poor guy make some easy money.

luda002

Brah-
You need to punt this to a legit financial planner. The interests being served here are yours and the banks for sure, and maybe the client.
Your boy wants you to do it because its good for his bank and probably him. You want to do it to pop a bottle or buy Warcraft gold or give to charity or whatever.
Your reputation and that of the institute you represent (and all of us fellow charter holders) is worth more than this. If you’re going to do it, your caveats should be more frank, and you should disclose that you have not evaluated the investment in the context of the clients portfolio, objectives, and constraints.
That could be hard because you want to help your boy and make a few duckets, but its the right thing to do.

kkn006

Do you have a compliance professional in your firm to adress this with? If you are an independent, perhaps the institute has a “hotline” that can address this more conclusively. I believe this thread has actually done a pretty good job of the task, and if I were you I would lean against doing it based on what has been pointed out. It appears your client has hired you to cover its bases and follow the letter of the low and not the spirit. The fact that a judge is involved (and you should know these circumstances pretty well to proceed cautiously) raises flags. Even more flags are raised in my eyes from a simple circumstance: the prospective annuitant actually does not have a retained financial planner, and is therefore either (1) a layman being sold a product and has not been alerted that he/she needs to have one involved or (2) someone who believes self to be fairly up to the task. The fact that a judge has been involved raises suspicions with regard to the “gravity” of the situation. And indeed, the level of expertise you have so far provided does not go far enough to contribute to the safety margin the judge intends by his order. Sorry if I am repackaging what has already been said, but my opinion is to turn down the assignment.

eoin

You’ve probably either decided to take the assignment or not already, but here’s a little tidbit I just received.
Speaking of Daubert challenges (see item above), a new court ruling serves as a warning to valuation analysts who testify outside their range of expertise. A federal trial court recently severely limited a financial expert’s testimony because of his lack of qualifications. Often, an expert is deemed qualified and then the expert’s methodology is challenged, but that’s not what happened here.
Don’t go there:  In the SEC’s current trial against a former Goldman Sachs trader, Fabrice (aka Fabulous Fab) Tourre, Tourre brought in an expert to testify about collateralized debt obligations (CDOs). The trouble was the expert had no experience with CDOs. While he was an expert at structured finance, he was more of an economic generalist and also a “professional testifying expert,” as the court put it. In pretrial Daubert proceedings, the court ruled the expert is “not qualified to present this opinion” about CDOs. “Being a professional testifying expert in the financial area does not give an individual the qualifications to opine in every financial area as to every type of analysis,” the court said.