Investment & Retirement Protection

A Financial Self-Defense Plan for Seniors

Financial fraud and abuse can happen to anyone, but older adults are particularly vulnerable. Unethical individuals may prey on older adults who aren’t as savvy as younger consumers, or who have mental impairments that make it difficult for them to make retirement financial decisions. Often, these individuals are targets because they’ve worked hard for years and accumulated significant wealth. Don’t let yourself or a loved one become a victim. Familiarize yourself with common red flags so that you are prepared to defend yourself from financial abuse.

Watch Out for These Red Flags 

The Certified Financial Planner Board of Standards (the group in charge of licensing CFP® professionals) recently put together a guide, “Financial Self-Defense for Seniors,” designed to help seniors protect themselves from unscrupulous financial professionals. Here are a few red flags the guide suggests watching out for:

The advisor has a lot of useless designations or credentials. Virtually anyone can call themselves a retirement or financial planner or financial advisor. Many of these people will have fancy-sounding credentials following their name. Some credentials (like CERTIFIED FINANCIAL PLANNER™ professional, or Certified Financial Analyst) are legitimate and a sign the advisor has extensive training and expertise. Others are basically meaningless and require little special study or training. Research an advisor’s designations. You should also ask what organizations supervise the advisor (such as FINRA or the SEC) and then check with those groups to see if there has been any disciplinary action against the advisor.

You’re confused about the product you’re being sold. If you don’t understand what kind of financial product you’re being sold, don’t buy it. Make sure you understand the risks, benefits and costs of any product. For example, complicated products, like variable annuities, may be sold to seniors who don’t completely understand the fine print, such as high annual expenses and costly withdrawal fees. If you have concerns or a product seems especially complex, don’t hesitate to get a second opinion from another financial investment professional.

Investment Protection

You’re offered “free” advice that’s actually a sales pitch. Older adults often receive invitations to free dinners and seminars on financial education. There’s nothing wrong with attending these events. But be aware that the presenter’s ultimate goal may be to sell you a particular investment product or service. If you attend such an event, don’t take the advice offered there at face value. If the offer is intriguing, research it on your own, and then contact the advisor if you’re interested in pursuing it further.

Offers that sound too good to be true. Whether it’s a great deal on a new car or an investment that promises a truly amazing return, if an offer sounds too good to be true, it probably is. Remember, all investments come with risk. Be extremely skeptical of anyone who promises you a “guaranteed” or “safe” return. Regulated brokers and advisors aren’t permitted to make such claims.

Friends, family members or acquaintances who are offering financial advice. Unfortunately, financial scams and abuse sometimes start close to home. There have been cases of religious leaders selling inappropriate products to their congregants, for example, or of community leaders using their respected position to abuse people’s trust. Even if you know someone personally, be sure to do your due diligence before taking their financial advice. Ask the same questions that you would of any financial advisor: Are they are fiduciary? How is he licensed or supervised? What is his experience? If anything seems amiss, walk away, no matter how much you like the person. A true friend will not pressure you to make financial and investment decisions that aren’t right for you or that you’re not comfortable with.

The advisor offers to complete the paperwork for you. Always complete all financial paperwork yourself. Sign documents personally, and don’t leave blank spaces that could be filled out by someone else later. In the best-case scenario, the person completing the paperwork could make an innocent, but serious mistake. In the worst-case, they could deliberately falsify information with the aim of defrauding you.

Take Steps to Avoid Financial Abuse

When it comes to making important retirement and investment decisions, it pays to be cautious and thorough. Before deciding to work with a financial advisor, make sure you understand their credentials, experience, how they are compensated and how they are regulated. Before buying a financial product, make sure you understand what it is, how much it costs and whether or not it’s truly appropriate for your situation. Choosing a CERTIFIED FINANCIAL PLANNER™ professional is one way to be sure that you’re working with an advisor who is committed to the fiduciary standard, or working in your best interests at all times.

By Chris Cooper

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