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Sales Practices to Elderly Under FINRA’s Radar

Regulators are taking a much closer look at the sales practices of brokers and firms involving high-risk investments targeting seniors. As reported April 14 by Investment News, the Financial Industry Regulatory Authority (FINRA) currently is gathering data from firms regarding the products they market to seniors, the percentage of revenue they derive from those sales and the designations they are using to market themselves to older Americans.

Elderly individuals are especially vulnerable to offers of yield-chasing and high-risk products, says FINRA chief executive Richard G. Ketchum.

“These are people who have been particularly impacted by reductions in interest rates because the cash coming from their investments often is a significant supplement to whatever 401(k), pensions and Social Security they have,” he said in the Investment News story.

During a compliance conference held last week at the Securities and Exchange Commission (SEC), panel participant Mercer Bullard, president of Fund Democracy and professor of law at the University of Mississippi, predicted that the United States is facing what he calls a “senior crisis” posed by the risk of seniors’ outliving their assets and their declining ability to manage their money.

“What we’re looking at is a massive increase in senior misery,” Bullard told the audience.

Bullard attributes some of the reasons behind this senior crisis to the increasing sophistication and complexity of today’s financial products and investments.

“There’s probably someday going to be a good argument that anyone over 75 shouldn’t be sold anything that is outside of a predetermined list of fairly simple funds, meaning low volatility and low risk,” he said in the Investment News story. “Otherwise, we’re going to see millions of seniors living on Social Security who are not expecting that to be their standard of living.”

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