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Taking Action Against Perpetrators of Senior Fraud
By
Michael A. Piekarz
Staff Writer
Avoiding
investment scams preying on seniors is becoming easier as regulators target
questionable business practices including the use of dubious senior financial
advisor designations.
According to estimates by Consumer Action, a consumer education and advocacy
group, while seniors 60 and older make up 15 percent of the U.S. population,
they account for roughly 30 percent of fraud victims. One of the keys to reducing
the number of victims is to help seniors spot and avoid questionable investment
tactics – a task made much more difficult when scammers use official sounding
titles.
On September 5, 2007, the U.S. Senate Special Committee on Aging held a hearing
to examine some of the questionable practices used by so-called senior financial
investment specialists in order to gain access to the retirement savings of older
Americans.
Much of the hearing focused on false or misleading credentials often used in
scams against senior investors. “Increasingly, licensed securities professionals,
insurance agents and unregistered individuals are using impressive-sounding but
sometimes highly-misleading titles and professional designations,” testified
Joseph P. Borg, president of the North American Securities Administrators Association
(NASAA).
Borg also testified that the use of professional designations by persons without
special training is likely to deceive seniors. “Many of these designations
imply that whoever bears the title has a special expertise in addressing the
financial needs of seniors,” he explained.
The Aging Committee’s investigation revealed that many of the designations
that have been cropping up have limited or no value with respect to advising
seniors on financial matters and that often these designations are obtained simply
by attending a weekend seminar and passing an open-book, multiple-choice test.
Many seniors targeted by salesmen using these designations have lost their life
savings because they were steered toward investment instruments that were unsuitable
for them given their retirement needs and life expectancy.
Following the September 5th hearing, chairman Senator Herb Kohl (D-WI) stated
that he intends to develop legislation that will provide a uniform standard for
the accreditation of senior financial advisors that state regulators would be
encouraged to adopt.
“We know that an attorney must go to school for three years and pass a
state bar exam. A CPA must have a college degree, an additional year of study
and must pass a national exam. Neither can offer their professional services
without those credentials,” said Kohl.
“Seniors should be able to trust the people who invest their money. They
should not be worried that the title after their advisor’s name is scarcely
more than a marketing ploy and that it was earned through sufficiently rigorous
financial education or training,” he said.
During the hearing, chairman Christopher Cox of the U.S. Securities and Exchange
Commission (SEC) offered testimony about the SEC’s relatively new initiatives
targeting senior investment fraud, setting the stage for the Senior Investment
Summit that was held on September 10.
Minnesota’s Attorney General, Lori Swanson, spoke on the second panel about
her state’s efforts to eliminate senior investment fraud, citing specific
complaints filed by Minnesota against companies that are inappropriately selling
annuities to seniors.
William Galvin, secretary of the Commonwealth of Massachusetts, offered testimony
about the broad range of violations his office has encountered involving questionable
senior financial advisor designations. Massachusetts was the first state to conceive
and impose a regulatory structure on this complex issue, with Washington and
Nebraska following in rapid succession.
Other witnesses on the second panel included Nicolas Nicolette, president of
the Financial Planning Association (FPA) and Sandy Praeger, Insurance Commissioner
for the state of Kansas and President-Elect of the National Association of Insurance
Commissioners (NAIC). Nicolette testified about the value of legitimate senior
financial advisor designations and education, such as Certified Financial Planner
(CFP).
Nicolette also described the impact inappropriate designations have on the credibility
of the legitimate industry and what efforts FPA and other organizations are taking
to protect that credibility. Praeger spoke to the committee about the NAIC’s
Suitability Model with respect to the sale of all life insurance and annuity
products.
On the final panel, Gary Bhojwani, president and CEO of Allianz of America Corporation,
responded to the allegations of sales and marketing abuses levied against his
company both by state regulators and the media. As part of his testimony, Bhojwani
announced several new policies in an effort to safeguard seniors: the appointment
of a chief suitability officer, the development of an internal list of approved
senior advisor certifications and the institution of a process through which
every annuity purchaser over the age of 75 receives a follow-up call from Allianz.
Lastly, Edward Pittock, president of the Society of Certified Senior Advisors,
offered testimony in response to criticism from state regulators that the Certified
Senior Advisor designation is often misused or misrepresented as signifying financial
expertise, which Pittock contends is not its purpose or intention. Several firms
recently have stopped using the CSA designation.
A Senior Summit was convened by the SEC on September 10 to further examine the
issue of financial fraud against seniors. The event further examined how regulators,
community organizations and others can increasingly coordinate efforts to protect
older Americans from abusive sales practices and investment fraud.
AARP, the Financial Industry Regulatory Authority and the NASAA were leading
participants at the Seniors Summit.
“Americans are living far longer than ever before. As the baby boomers
reach retirement age, more than 10,000 Americans are turning 60 every day – and
the net worth of older Americans is growing to historic proportions. That has
made seniors the prime targets for scam artists and securities swindlers” said
SEC chairman Cox.
“Our Seniors Summit brought together regulators, law enforcement officials
and community groups from around the nation to join forces in protecting older
Americans from investment fraud,” he said.
This page and its contents ©2007
Metropolitan News Company, Inc.
