You’ve heard the saying: “There’s no free lunch.” Well, that is turning out to be true for many of the nation’s senior citizens who are being courted by investment firms in the form of free meals or free “educational” events that end up being mere sales pitches for their investment products.
This problem has become so pervasive that The Securities and Exchange Commission (SEC) and AARP held a “Senior Summit” to focus on these practices that, in some cases, have left seniors with full stomachs but empty pockets.
Why are senior investors such attractive targets for these schemes? The Associated Press reports that an estimated $16 TRILLION -- three quarters of the nation’s consumer financial assets -- is held by households headed by persons 50 and older.
The SEC, now on full alert about the growing problem in California and other states where there are large numbers of retirees, has put together the following tips for seniors to consider before exposing their hard-earned money to possible investment fraud. Investors will find more valuable information by going to the SEC Web site at www.sec.gov
Seniors — Beware of Investment Seminars
No Free Lunches
INVESTMENT SEMINARS ARE DESIGNED TO SELL
Although you have been invited to an “educational” program or investment “workshop,” never lose sight of the fact that the sponsor's goal is to sell investment products to new customers. Don't be taken in by laims of “urgency” or “limited space availability" for the seminar.
BE ALERT TO POSSIBLE SCAMS
Investment seminars are legitimate sales practices. However, some seminars may involve fraudulent sales practices such as sales of fictitious products and outrageous misrepresentations of risk and return. You should always thoroughly check any product before investing.
THE SEMINAR'S SPEAKERS MAY BE BIASED IN THEIR PRODUCT RECOMMENDATIONS
Although seminar solicitations generally focus on the speakers, they may not include the name of the firm or product sponsors. Product sponsors, like mutual fund companies or insurance companies, may fund the seminar with the expectation that their products will be sold to the attendees. Always get a disclosure about any products that you are thinking about purchasing, including information on fees paid by the product sponsor.
ADVERTISING AND SALES MATERIALS MAY BE MISLEADING
Advertising and sales materials may include misleading or exaggerated statements about the safety, liquidity or anticipated rates of returns. Sales materials also may make comparisons between dissimilar investments or services. Some firms fail to disclose that they have paid for positive testimonials from other customers.
“EXPERTS” MAY MISREPRESENT THEIR QUALIFICATIONS
The education, experience, and other requirements for receiving and maintaining a "senior" designation vary greatly and in some cases may be a marketing tool. Always thoroughly evaluate the background of any financial adviser before you hand over your hard-earned money.
PRODUCT RECOMMENDATIONS MUST BE SUITABLE FOR YOU
Products are not “one size fits all.” Make sure that any investment you make meets your investment objectives, risk tolerance, and time horizons.
DON'T BE A VICTIM OF “BAIT AND SWITCH” TACTICS
Unfortunately, too many seniors have replaced existing investments with investments that are unsuitable or have steep sales commissions, high surrender charges or tax consequences.
Source: “Protecting Senior Investors: Report of Examinations of Securities Firms Providing 'Free Lunch' Sales Seminars.” (Joint Report of SEC, NASAA, and FINRA, September 2007)
