New York Estate Planning & Elder Law Blog
As increased numbers of investors reach the age of retirement, the market for investment services designed for the needs of seniors has greatly expanded. The needs for retired seniors is often unique from those individuals who are still working. For example, senior investors must execute a plan that allows for a comfortable living without the fear of running out of money. Because of this growing market, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are concerned about the potential for abusive sales practices that may constitute elder financial abuse.
What is Elder Financial Fraud?
There are three primary ways in which elder financial fraud is committed. These include when a financial advisor or stockbroker:
- Knowingly, through the use of deception or intimidation, deprives an elderly person of personal funds, assets, or property;
- Knew or reasonably should have known that the elderly person lacked the capacity to consent; and
- Breaches a fiduciary duty owed to an elderly person which results in an unauthorized sale or transfer of property.
A popular method for committing elder financial fraud involves the use of “free” lunch seminars. Financial advisors organize seminars advertised as being for informational purposes with the promise of a free lunch and other incentives to encourage people to attend. They often are held at upscale locations, like hotels, restaurants, or golf courses.
These seminars are frequently targeted specifically at senior citizens by promising to provide advice and information to help secure the financial resources to make it through retirement without running out of money. In addition, financial advisors at these seminars may provide investment advice and planning for passing on assets to children or other heirs.
While free lunch seminars are often presented as being only for the purpose of providing information to seniors, they are quite often actually organized in an attempt to obtain new customers. Some of the most common products sold during these seminars include real estate investment trusts, mutual funds, and reverse mortgages.
Alternatively, financial professionals may also use misleading designations in order to secure the trust of investors. A special designation is intended to indicate a specialty or expertise in a certain area. When a person does not have the special training or expertise that the designation represents he or she as having, it is often an indication of an attempt to deceive. As it relates to elder financial fraud, misleading designations include “senior specialist” or other designations that indicate a specific expertise in the needs of senior investors.
It is important to keep in mind that free lunch seminars and misleading designations are just two of the many ways in which elder investor fraud may occur.
Protecting Against Fraud
There are several ways in which seniors (and all investors) can help protect themselves from investment fraud, including, but not limited to, the following:
- Investigate your advisor/stockbroker and do not agree to make an immediate decision if you are not comfortable;
- Do not let your fear impact your decision: advisors and stockbrokers may attempt to use issues like your fear of outliving your retirement funds or losing it all due to a serious event (like hospitalization) to influence your investment decisions. While these issues should be considered and planned for, they can also be used inappropriately to steer you to unsuitable or unnecessary investments or decisions; and
- Report suspected misconduct to authorities like FINRA