An arbitration panel has ordered Woodbury Financial Services Inc. to pay $850,000 in damages to a Florida couple who said their money was put into unsuitable insurance and annuity products that couldn’t pay them the income they were promised for retirement. The products were sold by a deceased advisor who had previously been accused of taking hundreds of thousands of dollars in another client’s money, said the couple’s attorney.

Robert and Elizabeth Catana of Key West asked a panel of the Financial Industry Regulatory Authority (Finra) for a minimum of $600,000 in compensatory damages related to the three insurance products they were sold: a variable universal life insurance policy issued by Allianz; a variable annuity issued by Pacific Life; and a variable annuity issued by Lincoln Financial.

According to the couple’s attorney, Matt Wolper of the Wolper Law Firm in Plantation, Fla., “What the financial advisors did is recommend that my clients terminate legacy life insurance and annuity products that they owned at a different brokerage firm, promising them better returns, better opportunity and greater benefits with these new products. That didn’t turn out to be true.”

Wolper said the sales pitch relied on misrepresentations about the benefits and omissions about risks in the policies, specifically the reality that the products could not keep up with promised income.

Woodbury is a subsidiary of the Advisor Group, the country’s third-largest independent broker-dealer. Firm representatives did not respond to requests for comment.

The primary advisor involved in the sale to his clients, according to Wolper, was Raymond Anthony Ferro Jr. According to his BrokerCheck page, Ferro was accused of wrongfully transferring $330,000 from another client’s bank account, and the complaint was filed in February 2020. The settlement amount in that case was $1,569,281, according to BrokerCheck. Another customer dispute resulted in a $285,000 settlement.

According to the Catana complaint, Ferro was hard-selling the annuity and insurance policies to the Catanas, a couple approaching retirement, under false pretenses, said Wolper, with “the allure of income and death benefits that were illusory. The idea was that these new products would provide an income stream that would last for life, but the illustrations that resembled reality did not support that conclusion.”

In the case of the insurance policy, the brokers referred to cash that was available on the policy as income, when it was really a loan against the policy, Wolper said, which would erode the policy so that the death benefits and cash value would go down until the policy would be at zero. “And then you have no death benefit and no cash value,” he said.

With the annuities, there was not adequate disclosure of the risks and costs. “The income on the annuities is different,” he said. “You have a rider that you pay for and that’s a fixed amount, but depending on the value of the annuity, it could be what is represented or it could be significantly less and there was just not adequate disclosure of those things when the products were sold.” Wolper said the policies themselves were not flawed per se. Instead, he said, the financial planning was flawed, since the reason for moving the assets was commission-driven. The couple took action when they realized that the products would not help them achieve their retirement goals and then heard that Ferro was terminated by Woodbury, said Wolper.

Woodbury has not confirmed that it terminated Ferro. According to his BrokerCheck page, he ended service with the company in 2020, and according to public records, he died in April of the same year.

Woodbury was fined $225,000 by Finra in April 2019 for failing to adequately supervise additions to existing variable annuity contracts.

“From June 2013 until June 2015, Woodbury's system for supervising additions to existing variable annuities was not reasonably designed to achieve compliance with applicable securities laws and FINRA rules, including those governing suitability—a problem that affected more than 3,800 transactions during this period,” the agency said in its letter announcing the fine and censure.

Woodbury is headquartered in Oakdale, Minn., and it has $74.2 billion in assets under administration according to its website and 1,506 financial professionals.