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Beware 'Specialists' Spinning Bad Advice
Senior specialists may entice you with a free lunch, but don't bite on the products they sell.
September 2006
By Laura Cohn
The postcard Ruth Mitchell received in the mail a year ago seemed intriguing: an invitation to a "free dinner" and investment seminar at a local restaurant near her home in Columbiana, Ohio. Out of curiosity, Ruth, 64, a figure-skating teacher, and her husband, Len, 82, a retired architect, decided to attend.
When they arrived, the Mitchells and 20 or so other seniors were told they had to register by leaving their contact information. Before dinner, they sat through an hour-long sales pitch by advisers purporting to be specialists in senior-related financial matters. "They tried to ramrod things down our throats," Ruth says. "They talked too fast and talked in circles. They promised high rates of interest on annuities." The Mitchells decided to pass, but one of the advisers called them several times at home. Her advice to other seniors: "People shouldn't bother to go."
That's exactly what federal and state securities regulators and consumer advocates are warning. Frequently, so-called senior specialists who run these seminars have little training or expertise in financial matters, according to regulators who have filed more than two dozen enforcement actions against advisers. The suits claim that the advisers persuaded retirees to buy high-commission products of questionable value, such as equity-indexed annuities.
"The critical thing for people to understand is we're talking about inappropriate financial products for people over 65,"says Louise Renne, a partner at Renne Sloan Holtzman Sakai in San Francisco, who has filed a class-action lawsuit against several companies involved in senior investment seminars.
An Alphabet Soup of Certifications
If you attend one of these meetings, advisers may assure you that they have certifications that prove expertise in providing services to investors nearing or in retirement. Indeed, regulators note, there's been an explosion in recent years in designations that claim to show that advisers have these qualifications-certified retirement financial adviser (CRFA), chartered senior financial planner (CSFP) and certified financial gerontologist (CFG), just to name a few.
However, training requirements vary among certifications, from years of study to several hours of online coursework. Deciding if an adviser has financial expertise can take time, but the due diligence is worth it. "Be careful about who you trust," warns Barbara Roper, director of investor protection at the Consumer Federation of America. "A lot of people out there want to get their hands on your money."
With the oldest baby-boomers turning 60 this year, regulators worry that financial fraud targeting the elderly will rise. As a result, the federal Securities and Exchange Commission and the North American Securities Administrators Association (NASAA) are examining firms that sponsor investment seminars aimed at seniors. "It's an extremely serious problem," says Patricia Struck, president of NASAA. "If we aren't proactive, we're missing an opportunity."
In some of their enforcement actions, securities regulators have accused advisers of persuading seniors to liquidate their holdings to buy products that the advisers are selling. In many instances, the suits claim, the advisers did not have the licenses to sell financial products.
Last November, for example, Massachusetts securities regulators filed a complaint against Investors Capital Corp., a registered broker-dealer based in Lynnfield, Mass., claiming that it failed to adequately supervise the sales tactics employed by many of its representatives. The complaint charges that some of its agents misrepresented their qualifications at senior seminars. For example, the state says, one representative claimed that his certified senior adviser title gave him the background to solve seniors' financial problems. Another representative who used the CSA and certified elder planning specialist titles persuaded a 71-year-old woman to sell off her securities and buy two equity-indexed annuities for $700,000 without informing her of their 15-year surrender period and 25% early-withdrawal fees, the complaint says. (The company declined to comment.)
According to a suit filed by Renne's firm, one of the litigants, Beverly Buhs, of Millbrae, Cal., then 73, attended an estate-planning seminar and bought a deferred annuity in 1997. The complaint says she was not told that the annuity carried a penalty for early withdrawal. When she needed the money after her husband died in 2002, she had to pay more than $20,000 in fees, the suit says.
Check a Financial Adviser's Credentials
If you're looking for financial help, first understand the meaning of the adviser's credentials. If an adviser claims to have a title you don't understand, call NASD, an association of securities dealers, at 301-590-6500 or check the group's Web site for a description of designations (www.nasd.com, click "Investor Information," then "Professional Designations").
For example, someone who wants to become a certified senior adviser, the designation held by the salesmen in the Investors Capital case, takes a home course or three days of class work offered by the Society of Certified Senior Advisors. The course is designed to teach professionals, perhaps in real estate or social work, how to better serve their senior clients. "We have been hurt in terms of our reputation," says Dan Danbom, the society's director of communications. "We don't provide financial credentials. Our designation is a supplement to what you do, not a substitute."
An investment professional who sells products that generate a commission must be registered or licensed with a state securities regulator, state insurance department or the SEC, or as a representative of a broker-dealer that's a member of NASD. If you want to check for complaints against securities brokers, the NASAA provides a state-by-state list of regulators (www.nasaa.org; 202-737-0900). If you're looking for just advice, check with a fee-only financial planner who is a member of the National Association of Personal Financial Advisors (www.napfa.org).
You can also ask an investment adviser for a Form ADV (Adviser Public Disclosure). The form, which the firm files with the state and the SEC, provides information on the training of the firm's advisers and whether the company has been accused of wrongdoing. You can find ADVs at www.adviserinfo.sec.gov.
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