Grading Promoters – Waterford Financial Group… F

As a follow up to “Where to find reliable information”, I want to let you know about another seemingly unscrupulous self directed IRA/401k promoter… Waterford Financial Group ( Again, I’ve never spoken with them or dealt with them in any way, but one visit to their web page is cause for alarm. At the time of this writing, their web site links to various advisory opinions, private letter rulings, and field service advisory letters from the IRS & DOL (the DOL rules on IRA/401k prohibited transactions and exemptions).

The page in question lists summaries of these letters. It is important to first acknowledge that their “About Us” page says:

“Waterford Financial Group is a national marketing and financial services company with a consortium of tax professionals and Tax Attorneys on staff. Our purpose is to educate individuals and other professionals about the many benefits contained in the tax code.”

I always find it odd that companies spotlight all the tax attorneys on their staff without naming those attorneys or substantiating their claim in any way. If you’re browsing my blog posts, I hope I don’t come across too negative, but my pet peeve is predatory practices… and this is not minor issue when it comes to messing with people’s wealth.

Back to the Waterford Financial Group web page: They link to a DOL opinion with the description:

“Here’s a ruling where an IRA owner had his IRA make a loan to a corporation owned 47% by him. Sure beats dealing with a bank.”

The description infers that the proposed loan is acceptable and compliant. So no need to actually read the document since their staff full of tax attorneys probably wrote the description, right? Wrong. If you just scan the actual document you will find the emphasized conclusive paragraph at the end:

Accordingly, a prohibited use of plan assets for the benefit of a disqualified person under section 4975(c)(1)(D) or an act of self-dealing under section 4975(c)(1)(E) is likely to result if Mr. Darragh directs the IRA to loan funds to the Corporation. [Emphasis added]

That is the official government opinion explaining that the proposed loan is likely to result in a prohibited transaction (which triggers hefty taxes and penalties). So how in the world can a “consortium of tax professionals and Tax Attorney’s on staff” allow such careless claims on their site? Who knows. One possibility is bad attorneys… you know, the kind that make attorney jokes meaningful. Or maybe there’s just no attorneys. One of my good friends has a son who has a few imaginary friends. If he plays his cards right those imaginary friends might grow up to be tax attorneys that work for him.


An update 5/1/08 – A prospect of mine the other day was saying she was considering either restructuring her retirement plan using my company or Waterford Financial Group (the subject of this blog post). So I sent her this blog post to help keep her out of trouble. Apparently it was passed on to Waterford (which is fine with me; they should certainly know about the presence of dangerous information on their web site).

This morning I got an emailed letter from WFG that, instead of thanking me or apologizing for their misleading information, threatened to sue me.

I thought it would be relevant to share with my readers:

Click here to read their threat.

Don’t start sending me money for a legal defense fund just yet, this is frivolous… but also revealing.

Click here to read my response.

Also, in the original post today I added the word “seemingly” in front of the word “unscrupulous” to reiterate that I have never done business with WFG or known anyone who has.

Hopefully their response to my post is equally as revealing as the post itself. Making mistakes is inevitable; I’ve made plenty of mistakes before, possibly even some in line with WFG’s misleading info. But lashing out is a disappointing and non-corrective reaction. Again, it’s no fun to focus on negative issues such as this, but there’s a lot this type of stuff going on out there, and it’s important for people to be able to choose service providers who are truly capable of operating in a safe and effective manner.

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