Consumer Hub: Protection & Prevention

The Drumbeat Continues: Top 10 Ways to Protect Senior Investors

The Securities and Exchange Commission and FINRA have been raising the bar on senior investor safety, conducting several initiatives since 2007. Now comes a report entitled National Senior Investor Initiative: A Coordinated of Examinations. If you are involved in serving the senior marketplace as a life or health insurance agent or registered investment advisor, you may want to review it.

Based on 44 broker-dealer examinations, the regulators identified a number of best practices they believe can further reduce senior investor abuse. Although the report was prepared for broker-dealers, most recommendations also apply to advisors who wish to ramp up their own compliance efforts. Best practices to adopt include:

  • Increase transparency and communications around advisor compensation. The goal: to make sure all senior investors understand how their advisors are compensated. Advisors should provide a detailed schedule of fees and expenses for every product provided and explain all cost/fee elements in simple terms.

  • Complete a comprehensive investor profile, documenting the senior’s financial resources, preferences, and appetite for risk.

  • Follow broker-dealer suitability requirements, making sure all products recommended are consistent with client wishes and risk appetite and completing all required forms.

  • For seniors who purchase variable annuities for their individual retirement account, explain alternatives and tax implications.

  • Document all conversations in order to prevent complaints and errors-and-omissions disputes. When a client agrees to a proposed investment strategy or product, document that decision in the file, as well.

  • Provide all required disclosure forms and secure the client’s signature on each form.

  • If you do seminar marketing, submit your script and visuals ahead of time for approval. During the session, avoid improper terminology or misrepresentations that violate FINRA requirements.

  • If you wish to pursue a senior designation, get your broker-dealer’s authorization first. Then select one that offers a rigorous program of study. Also check to see that the granting body is accredited, and that the program has a continuing-education component.

  • Prepare yourself to address cases of diminished investor capacity. Know the symptoms and signs and what to do if you notice a problem. Protect yourself by having a family member sit in on all client meetings.

  • If a senior complains about the products or services you’ve rendered, document it and comply with your broker-dealer’s requirements for flagging and submitting senior complaints.

With seniors in the spotlight and advisor sanctions increasing, the National Ethics Association recommends serving senior clients with compassion, attention to detail, and compliance discipline. Anything less could get you in hot water with the authorities and spark an errors and omissions insurance claim. Good luck!

For information on affordable errors and omissions insurance for low-risk insurance, investment, and real estate professionals, visit E&OforLess.com. For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center.