Sales Tactics
Often, financial representatives use high-pressure tactics and an aggressive sales approach aimed at conquering aversion to risk, and this poses an additional realm of concern for FINRA regulators. Often free “seminars” include a free meal and the venue is used to promote the sale of high-commission, overly risky financial products. These promoters will commonly apply scare tactics in order to motivate potential customers. It is also common to hear about promoters misrepresenting the suggested investments as being liquid, safe means to high yield earnings on customer investments. The misrepresentation and omissions may also include misleading or false credentials where promoters advertise themselves as “certified senior specialists” in order to attain the cooperation and trust of their senior audience.
Taking Advantage
As we age, and become seniors, doctors tell us that most of us will experience some level of diminished mental capacity. This is one of the reasons financial elder abuse is of such great great concern to law makers. Those able to live a long life may experience a point when mental and cognitive functions begin to decline as a natural progression of the life cycle. For the average person aged 60 years old, financial knowledge begins to be lost at a rate of about 2% per year; however, this demographic also experiences a confidence in their own financial knowledge simultaneously. This creates a precarious combination that can easily be exploited by fraudulent financial advisers who target seniors.
Protection from Financial Elder Abuse
As a first step, seniors would do well to at least verify that the broker or financial adviser and the brokerage firm have the correct licenses and are also actually registered to sell securities or investment products within the state where they are selling them and that the investments are also registered in the state. This can be accomplished by verifying through a state securities regulator. Also, you may check your advisors record at finra.org to see if he or she has prior written complaints from customers. In addition, suggested investments or strategies may be submitted to an expert for an objective evaluation of the course of action before the investment is actually made. Consider getting a second or even third opinion from another financial professional.
Family members or those who hold a close relationship with the senior investor, personally or financially (like one’s accountant), should take steps to monitor the senior’s account statements, investments, and the documents that accompany transactions carefully to decide if any indications of abuse or fraud arise. These red flags could be any of the following: an inability of the senior to comprehend the investment’s nature; lack of liquidity, high levels of risk, or unusual activity as evidenced in account statements; certain securities or particular sectors that are highly concentrated; excessive trading activity; “home-made” account statements produced by a small broker-dealer or an independent dealer; the underperformance or large losses of a suitable benchmark; cash balance that includes a negative number; and withdrawals of cash unexpectedly, especially involving wire transfer.
This concludes what has hopefully been a helpful, informative overview of elder financial abuse, including how it happens and how to identify when this becomes a problem.
If you believe that you may have been taken advantage of as a senior customer and may be the victim of elder abuse regarding unsuitable investment strategies, contact Daniel Carlson at the Carlson Law Firm today for a free consultation at 619-544-9300.
