As the elderly population grows, it's incumbent on advisers and brokers to put those clients' best interests ahead of their own.
Everyone knows, right, that the elderly are among the most vulnerable members of our society. It's the fastest growing segment of the population in the United States — what with about 10,000 baby boomers turning 65 every day — not that 65 is the threshold for being elderly.
The point is that this demographic controls a lot of money, which makes it a prime target for advisers seeking to build their business. You've probably heard the numbers: Baby boomers hold around $15 trillion in assets and the generational wealth transfer is estimated at more than $30 trillion.
Between 2031 and 2045, 10% of total wealth in the U.S. is expected to change hands every five years, according to Accenture.
LONG WAY OFF
But 2031 is still a long way off. The immediate problem is advisers taking advantage of folks who may not be as sharp as they once were. Whether it's selling inappropriate products or outright stealing, there appears to be no shortage of financial advice practitioners who see no harm in doing just that.
For example, last month the Financial Industry Regulatory Authority Inc. filed a cease-and-desist order against Avenir Financial Group for sales of equity in the firm and promissory notes. It alleged Avenir lied about the health of the firm and raised more than $730,000 over three years in sales, mostly to elderly customers.
And a $400 million arbitration claim filed on behalf of the widow of Home Shopping Network co-founder Roy M. Speer alleges that Morgan Stanley Wealth Management, along with an adviser and branch manager, engaged in excessive trading, unauthorized use of discretion, and abused their fiduciary duty. The firm says the claim lacks merit.
Regulators, both at the federal and state level, have gone after several firms for allegedly pushing sales of high-commission, high-risk products such as nontraded real estate investment trusts on elderly clients. And stories of financial advisers being barred or even sent to prison for ripping off elderly clients are all too common.
The problem has become so widespread that Finra has established a toll-free hotline that elderly investors can call for assistance from Finra staff regarding concerns about their portfolio or their broker.
Protecting senior investors “remains an important priority of our organization,” Susan Axelrod, Finra executive vice president for regulatory operations, told reporter Mark Schoeff Jr. “It's important for us to be out there. It's important for us to act swiftly.”
In its first eight days of existence, the senior help line took about 100 calls from people ranging in age from 40 to 99. That's a lot of calls.
Granted, it's not a one-way street.
Older folks need financial help, particularly if they've never had it. Navigating Social Security, Medicare, long-term-care insurance and retirement planning can be daunting for anyone, let alone elderly people who have spent their lives building a nest egg for their golden years.
Advisers seeking to do the right thing by these clients can just as easily get burned.
Advisers can find themselves in a bind when they suspect elderly clients are victims of financial abuse — from family members, close friends or associates. The path of least resistance, in some cases, is to ignore it, but that's not the M.O. of most advisers.
SAFE HARBOR
To that end, Sen. Susan Collins, R-Maine, chairwoman of the Senate Special Committee on Aging, has said that giving safe harbor to financial firms would help address the growing problem of elder financial abuse.
“If they report [suspected elder abuse] in good faith, it seems to me they need some sort of protection, or many of them are not going to be willing to report,” she told reporters in February.
Financial advisers should be motivated rather than mandated to report instances of aging clients' being taken advantage of by relatives or other scammers, the senator said.
As the elderly population continues to grow, it's incumbent upon advisers and brokers to, yes, put those clients' best interests ahead of their own. That way, no one gets hurt.
