A Couple Won the Powerball. Investing It Turned Into Tragedy. - WSJ
In spring 2008, Paul Rosenau, a construction supervisor and heavy-equipment operator in Waseca, Minn., bought a Powerball ticketand hit a $59.6 million after-tax jackpot. Rosenau, a devout Lutheran and the son of a pastor, recalls with a tremor in his voice how he and his wife, Sue Rosenau, felt when they woke up the next morning.
They realized their granddaughter Makayla had died exactly five years earlier. She had Krabbe diseasea rare neurodegenerative illness that strikes infants and usually kills them in less than four years. Makayla died at the age of two. We were very sure [the Powerball jackpot] was divine intervention, Rosenau recalls, and we were very sure what we were supposed to do with it.
What they hadnt counted on, though, was that human intervention can be destructive. What happened next is a heartbreaking tale that shows how powerfully fees and commissions can pervert financial advisers judgment and crush their clients wealth. Its also why I think investors should welcome regulations that require advisers, brokers and insurance agents to act in their customers best interests. The Rosenaus promptly used $26.4 million of their winnings to fund a nonprofit, now known as the Rosenau Family Research Foundation. Its mission is to seek treatments for, and support the families of, children with Krabbe disease.
Having almost no investment experience themselves, the couple hired John Priebe, a local financial adviser and insurance agent, to manage the familys and the foundations money. Priebe worked for Principal Securities, the brokerage and investment-advisory arm of Principal Financial Group PFG the Des Moines-based retirement, asset-management and insurance giant. He claimed to be putting his new clients best interests ahead of his own, but thats not what the evidence suggests. Last month, an arbitration panel run by the Financial Industry Regulatory Authority instructed Principal Securities to pay $7.3 million in compensatory damages to the Rosenau foundation.
(snip)
According to evidence submitted at the arbitration hearings, Priebe started by buying $18.9 million of variable annuities for the foundation, earning an estimated $1.2 million in commissions. Those insurance assets generally have all the market risks of mutual fundsat vastly higher costs. Mutual funds, exchange-traded funds and other types of investments typically dont carry commissions and charge annual fees that can be 0.1% or less. Instead, the variable annuities picked by Priebe charged the foundation annual fees of up to 2% or more and carried commissions that could exceed 6%.
More..
https://www.wsj.com/finance/investing/a-couple-won-the-powerball-investing-it-turned-into-tragedy-fc8fd31c?st=bhlnoe36dljqzpr&reflink=desktopwebshare_permalink
![](du4img/smicon-reply-new.gif)
BlueWaveNeverEnd
(9,499 posts)question everything
(48,423 posts)Turbineguy
(38,047 posts)The Fund was spread across 5 investment firms. At the end of every year the investment firm performance was compared and the best performer got more of the share and the least performer got less. It worked very well and the Union members ended up with a nice fat Fund.
Mosby
(16,959 posts)You shouldn't have to be a financial/investment expert to invest and grow the principle, but that's the reality, the investment experts are mostly crooks like this guy and his firm.
Like it or not, he could have just opened a personal trading account and dumped it all in a couple index funds and he would be sitting pretty.
SWBTATTReg
(23,443 posts)All in one place too, from what I gathered. What a shame. They were better off, like you said, putting the funds in some index funds, good dividend stocks and be done w/ it. I guess it's a case of over analyzing, advisors get greedy, and set their scruples aside, and rip off their investors.
Happy Hoosier
(8,038 posts)Just take that money and stick in an index fund. DONE. FFS.
That kind of money can safely produce $2.4M a year in income.
"Divine intervention." Fuck me.
question everything
(48,423 posts)Happy Hoosier
(8,038 posts)Make yourselves the trustees, fund the non-profit, THEN stick in an index fund. Did that for a non-profit I served on the board of. It wasn't complicated.