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Seniors Need To Be Wary Of Endearing Sales Tactics
A 78 year-old woman was lured to a free investment seminar, where an insurance agent convinces her to purchase a $150,000 indexed annuity. Seniors are often lured into sales pitches by freebies or other bait and switch tactics. They may then be induced into investments that are inappropriate for them. Unfortunately, this trend is likely to continue. According to the Federal Reserve Board, American households run by someone 50 years of age or older control more than 75 percent of the nation's privately-held wealth. As the rate of the population turning 60 increases, so will deceptive and fraudulent investment practices.
Regulators are taking preventive actions. The FINRA, the U.S. Securities and Exchange Commission, and securities regulators in several states including California are conducting sweeps to determine the extent to which "free lunch" sales seminars comply with state and federal laws, and whether firms are adequately monitoring and supervising representatives who offer these seminars.
In 2001, the California Department of Corporations (DOC) implemented its Seniors Against Investment Fraud (SAIF) program. In 2005 SAIF provided ongoing education for 51,000 seniors at more than 440 events across the state. Based on its success, the SAIF program has become synonymous with senior fraud prevention efforts and is now considered a national model. Florida has adopted SAIF, and other states such as Iowa and Tennessee are also considering adopting the program.
The DOC assures transparent and open financial markets in California. As a regulator of financial markets, DOC oversees their fairness through examination and regulation of 296,000 corporations, businesses, and financial services professionals. Additionally, the self-funded DOC approves the sales of securities and franchises. The DOC generates job and economic opportunities by streamlining the license application process for financial businesses and professionals.
In addition, DOC has taken steps to improve financial literacy for California consumers. For example, the DOC's list of financial safety tips for California investors includes the following:
- Beware of unsolicited telephone calls from strangers offering get-rich-quick schemes.
- Shy away from high pressure tactics.
- Avoid investments where the seller has little or no written information about the company or written information about past performance.
- Be wary of investments sold on the basis of rumors or tips. Investments based on "inside information" are illegal.
- Conduct a background and license check on potential brokers, advisers, and lenders. Investors can quickly and easily check the licensing status and disciplinary history of firms and individuals licensed by DOC by contacting the department's toll-free Consumer Resource Center at 1-866-ASK-CORP (1-866-275-2677) or visiting www.corp.ca.gov.
- When in doubt about a potential investment, wait.
The DOC is California's investment and financing authority and is responsible for the regulation, enforcement, and licensing of securities, franchises, off-exchange commodities, investment and financial services, independent escrows, consumer and commercial finance lending, residential mortgage lending, payday lenders, check sellers, bill payers, debt management and debt negotiation services.
Preston DuFauchard is the California Corporations Commissioner.