By Bert Doerhoff, CPA
Aura Wealth Advisors
My clients have received, and perhaps yours have too: the “special invitation” to a free meal, at which a money expert will explain one or more “wealth preservation solutions” for retirement (usually, it’s an annuity). While these so-called educational seminars have been around for years, they seem to be growing more widespread as the number of retiring seniors increases. In fact, the U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and the North American Securities Administrators Association (NASAA) have listed these free meal seminars as a major concern related to elder financial abuse.
Nothing upsets me more than having a client tell me he or she attended a free-meal seminar, and now wants to change course and purchase an annuity that may or may not be suitable. To them, it sounds like a great deal – they’re going to maximize the upside potential of the market without the downside risk. Their money will be safe from market declines, and they’ll never outlive their money because the annuity will provide a steady income. To me, it means I’ve failed to protect my client from potential abuse.
As advisors, none of us wants to bad-mouth our competitors, and similarly, we don’t want clients to be afraid to trust the value of competent, ethical, client-centric financial advice. But in trying to be careful, we may also be letting our clients down when it comes to promoting good stewardship. How often do you try to preempt the “free meal” offer by educating your clients about the potential of financial abuse? If you do educate your clients, do you only communicate with your elderly clients, or do you make this information available to all your clients?
Any of our clients has the potential to become a victim of financial abuse. Adults can be vulnerable for many reasons, such as mental or physical illness, a lack of formal education, domestic violence or just a general lack of self-confidence when it comes to their finances. Our job as advisers is to not only watch for signs of vulnerability or abuse, but also to help clients – to the extent we can – understand the potential for financial abuse at any time during their lives.
Perhaps we could turn the “free meal” idea on its head, by partnering with consumer protection organizations to offer a “financial self-defense” seminar (with or without the free meal) for clients and potential clients (younger clients may prefer a different type of social event!). Alternatively, we could feature articles in our newsletters, work it into our client orientation processes, or devote a website page to tips and articles, and feature it in our blogs. This type of education needs to be ongoing and just in time, as clients begin to consider ways to secure their retirement plans.
We could probably all do a better job of communicating the dangers of financial abuse to our clients, regardless of their age. Don’t wait until your client asks for a change. By then, it may be too late.