Senior citizens are twice as likely as younger Americans to become victims of financial fraud. According to AARP, individuals 60 years of age and older account for 15% of the U.S. population, but represent one-third of all financial fraud victims.
These statistics are even more alarming given the fact that older investors often rely heavily on their financial advisers to invest their money and plan for their retirement years. And many investors put more trust and faith into those financial advisers with “senior designations” because they believe this certification means the adviser is uniquely qualified to market, sell or give advice about certain financial products.
But that is not always the case, says a new report from the Consumer Financial Protection Bureau. Financial advisers can use some 50 senior financial designations to tout various financial products, and not all of these senior designations require expertise or rigorous training. This can be confusing to seniors and make them vulnerable to potential fraud or abuse, says the CFPB.
“Not all financial professionals with titles like ‘retirement adviser’ and ‘senior specialist’ are qualified to help you manage your money,” says Skip Humphrey, head of the Office of Financial Protection for Older Americans, which is part of the Consumer Financial Protection Bureau. “Most financial advisers are well trained reputable professionals. But credentials alone don’t guarantee expertise or the quality of someone’s training.”
The CFPB’s report offers several recommendations to help state and federal regulators better protect seniors from potential investment fraud. Among them: Create a centralized tool for consumers to research and verify senior designations; SEC tracking of complaints related to senior designations; mandatory disclosures by individuals who claim expertise specific to seniors; and a requirement that holders of senior designations meet and maintain minimum levels of professional standards, including education, accreditation and a minimum standard of conduct.
In the interim, investors of all ages are wise to always be on the lookout for possible red flags when it comes to their investments, including:
- Overly consistent or unusually high returns. All investments carry some amount of risk. The bottom line: If it sounds too good to be true, it probably is.
- Hard-to-understand investing strategies. Legitimate financial advisers will take time to thoroughly explain your investments to you and answer any questions that you may have.
- High-pressure sales tactics. Reputable financial professionals will not pressure you to purchase a certain financial product or approach you with an investment whose “window of opportunity” is calls for an immediate decision.
- Guarantees. In the investing world, there are no guarantees. Period. Every investment has some potential risk.
The CFPB report, which you can read in its entirety here, was issued under a mandate from The Dodd-Frank Consumer Protection Act.