Sushi Money

   The Securities and Exchange Commission is holding a “Senior Summit” today at 1:00 pm Eastern on the topic of “Combating Investment Fraud Against Senior Citizens.”  Here’s a link to the live video webcast.  This sounds like an excellent conference with the SEC, several regulatory associations and the AARP taking a hard look at the scams senior citizens face, and how fraud can be avoided: 

“We need to do everything we can to ensure that seniors are well-educated about investment choices, and that they’re treated fairly and appropriately by brokers, investment advisers, and others in the securities industry,” said SEC Chairman Christopher Cox. “Avoiding scams requires a combination of information and common sense. Being aware of the latest fraud tactics and understanding how common investment products work can help seniors and investors of all ages keep their money safe.”

These issues are not solely confined to seniors either.  Many of the same hard-sell techniques are used to target investors of all ages, but the SEC is focusing on seniors as a particularly vulnerable group-  they have most of the wealth, and yet they have the least ability or time to deal with fraud or the loss of money.   And many seniors may also not have the ability or professional relationships to conduct a careful investigation before making a decision.  The AARP will also discuss ”social persuasion techniques” to show seniors how sales tactics are used to pressure people into poor decisions.  Here are a few examples:

• Phantom Fixation:  A prize or opportunity is used to tempt victims into taking action.  “If you sign up today, you can get a 3-day vacation!”
• Social Consensus:  Using false representations that neighbors, peers or respected members of society are doing the same thing.  “Mr. and Mrs. Smith have signed up, what about you?”
• Scarcity Tactics:  False claims about an investment or opportunity being time-sensitive.  “You  must act now!  This offer is only good today!”
• Reciprocity Principle: A basis of providing advice or help as a favor, and expecting the same.  “We’ve given you a free lunch and spent a lot of time talking about making money… why not sign up today to show us you appreciate coming here today?”

     I’m glad the SEC is putting this conference together- there are far too many instances of dubious investment representatives going after the wealth of seniors.  My mother has even received various calls from investment firms, as well as letter mailings, encouraging her to come to a “free lunch” or seminar.  The SEC has been investigating over 110 firms since 2006, and has found rampant fraud and questionable practices by many investment firm representatives.  As the SEC spells out, there is no such thing as a “free lunch” when it comes to investment presentations to senior citizens:

• Investment Seminars are designed to Sell
• Be alert to possible scams
• The seminar’s speakers may be biased in their product (investment) recommendations
• Advertising and sales materials may be misleading
• “Experts” may misrepresent their qualifications… they may not really be “experts”
• Product recommendations must be suitable to you… and may not be at these seminars
• Don’t be a victim of “bait and switch” tactics:  Don’t change your current investment strategy without careful analysis and a second, or third opinion!

     Certainly not all investment seminars involve fraud or coercive techniques to sell products to senior citizens, but it is important to be aware and make careful decisions if one chooses to attend a seminar (or work with a new brokerage firm representative).  There’s no need to sign up for any service on the day of the seminar!  You can always do so later after careful reflection and analysis.  Better yet, find a certified fee-only financial planner to review your current financial situation, and possible change of strategy.  The financial numbers are pretty amazing however.  In 2006 the SEC presented data that showed over 75% of the nation’s consumer financial assets, valuded at over $16 trillion, are held in households headed by someone aged 50 or older.  Check out this SEC website for more information about investment products, investor education and avoiding fraud.

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