How to protect older investors from fraud and scams

When Mary Bach and her husband began to think about retirement after more than three decades at the Westinghouse Electric Company, they suddenly received numerous dinner invitations from people who claimed to be local representatives of well-known financial institutions. These people, with alphabetical soups of letters following their names, presented presentations of financial products including numerous charts and graphs before the meal was served.

Despite delicious food and impressive credentials, Bach said she didn’t trust the presenters, who lacked brochures, flyers and details about how they complied with state laws. Just a lot of talk, she said.

They promised one thing though: no risk with guaranteed returns. Their goal was to hook Bach and others like her to later solicit them for a private consultation.

“Our conclusion is, enjoy the meal, but beware of the deal,” Bach said during a panel discussion co-hosted by the SEC and the American Association of Retired Persons.

Bach, who now works as chair of AARP’s Consumer Issues Task Force in Pennsylvania to protect senior citizens from fraud and scams, said a representative with the fanciful title of CSS, or certified senior specialist, later admitted to him that he had received a certificate in 24 hours on the Internet.

“We urge people to review credentials, use BrokerCheck, do their homework, and understand that the printed contract always trumps verbal promises and a nice dinner,” she said.

The FBI estimate that seniors lose more than $3 billion each year to scammers, who offer risky financial products through free lunches, sell high-yield bonds with so-called guaranteed returns or trick people into scanning QR codes at ATMs at local gas stations to invest in pseudo cryptocurrencies. According to the National Council on Aging, scammers prey on older people because they believe older people have a large amount of money in their accounts and are eager to exploit the combination of wealth and cognitive decline that can occur with age.

“Helping older investors know the signs of potential fraud to protect themselves from the assets they’ve worked their whole lives to accumulate must remain a central part of our collective outreach effort,” said SEC Commissioner Hester Mr. Peirce, during the round table.

But tackling the enormity of financial markets for older investors can be tricky because just a few bad investments or unscrupulous advisers can be financially devastating, said Phillip Aidikoff, a securities arbitration lawyer and former chairman of the Public Investors Advocate Bar Association.

FINRA rules require that an oral presentation for financial products be consistent with the risks and rewards associated with a particular investment. But often these presentations are followed by investors who receive a complicated prospectus or initial offering document that they do not understand, necessitating further oral presentations that must present a fair and balanced picture of the risks and benefits. .

“And let’s face it, even for people who are financially savvy and can read the offering documents, it poses a challenge. Whenever a new product is offered to the public, it takes some time to understand the real mechanics of the offering,” Aidikoff said.

In reality, brokers often receive substantial compensation for complicated alternative investments such as structured products. These commissions do not appear on trade confirmations sent to clients, Aidikoff said.

“If there’s one thing that’s clear to me, it’s that if you can’t understand the product right out of the box, I would turn around and run as fast as I can,” he said. he declares.

For financial advisers who have fiduciary duties to their clients, Aidikoff said they should understand who the client is and what is appropriate for that person at that time, which requires a detailed conversation about what that person has done in their life, what they want to do as they move forward, and what risk they are willing to take.

“The days of the defined benefit plan are obviously over. And now people depend on social security and their own ability to come together and make good investments to live (for) an ever-increasing lifespan. It’s a huge responsibility,” he said.

For older investors who are already falling into the traps, advisors and their family members should change the narrative on who to blame, said Byron Peterson, AARP Connecticut executive board and senior volunteer with the Fraud Watch Network.

“Right now, we tend not to recognize the criminal who prepared to carry out these crimes, but we (put) the blame on the elderly, which made them afraid to report it because they don’t didn’t want to be considered old and stupid,” he said.

Changes should also happen at the regulatory level, because most people don’t pay attention to education on topics because they don’t think they need it, said Amy Nofziger, director of fraud victim support at the AARP.

“Education is not the only way. Most people don’t wake up and think, “Today I’m going to be the victim of a bitcoin scam or an impostor,” she said. “We need to have interventions, systematic changes and continue to find other ways to fight these crimes.” .”