Separating scammers, seniors

Every year, Karen Liebig attempts to steer thousands of seniors away from investment fraud. And, yet, every year the numbers get a bit more grim.

Fraud against seniors rose roughly 40% last year, according to the North American Securities Administrators Assn. Like Willie Sutton and the banks he robbed, con artists flock to “where the money is,” and that’s largely with seniors -- increasingly so as baby boomers age.

That’s why Liebig, director of the Torrance-based KEEP-SAFE Coalition, a nonprofit education and advocacy group, supports recently introduced federal legislation that aims to curtail bogus credentials used to snare elderly clients.

The Senior Investor Protection bill would provide funding for states to monitor the credentials of people claiming to be senior or retirement specialists and provide funds to investigate and prosecute advisors who use fraudulent or misleading professional designations to get clients.

“There is no procedure in place that helps you differentiate between the honest and the dishonest,” she said. “We work with several elder law attorneys, who are fantastic, and some real estate people who are wonderful too. But, there’s very little that helps the average senior know the difference between these legitimate advisors and the guys who send you fliers, inviting you to a free lunch and investment seminar.”

In the past several years, a virtual alphabet soup of “professional designations” have cropped up purporting to signal that the bearer has some specialized training and expertise in investment planning for retirees.

There are now 263 financial advisory designations, said Laurence Barton, president of American College, a Bryn Mawr, Pa.-based school that licenses insurance professionals. Dozens of the newest credentials suggest that the advisor has special skills in retirement planning or advising seniors.

Consider, for instance, the “certified elder planning specialist,” a designation that required a 96-hour self-study course provided by the Institute of Elder Planning.

According to Massachusetts securities officials, the institute was run by an insurance broker who was not licensed to sell securities. The organization has since gone out of business, leaving no forwarding information.

Groups granting bogus designations are often boiler-room operations, authorities said. The moment you find one and stamp it out, dozens of similar groups scurry for cover, only to emerge later with new names and slightly revised scams.

William Francis Galvin, Massachusetts’ secretary of state, testified last year at a hearing of the Senate Special Committee on Aging that so-called certified senior advisors also gave the impression that they had special expertise in senior finances, but the appellation was “primarily a marketing tool.”

The Society of Certified Senior Advisors, which grants this designation, argues that its training and appellation are valuable but are not meant to indicate that the person has some specialized financial savvy. Rather, the group says its training helps advisors better understand seniors’ interests and needs.

The group even notes on the front page of its website that “the CSA designation alone does not imply expertise in financial, health or social matters.”

The Securities and Exchange Commission notes that a variety of organizations may designate a salesperson a “senior specialist.”

That may mean the advisor has received some specialized training in products geared to older investors, such as reverse mortgages. Or it may mean that they’ve learned nothing about investments but plenty about catchphrases -- such as “safe and guaranteed” -- that help advisors persuade risk-averse seniors to buy inappropriate products, such as equity-indexed annuities that lock up the account holder’s cash for decades. (This type of tax-deferred annuity may be appropriate for some people, such as someone who is young and rich. But for an older person of modest means, who may need to get money for an emergency, it’s usually a bad investment.)

“There are a bunch of guys walking around with initials after their names that they got by listening to a couple of PowerPoint presentations in a hotel seminar,” Barton said. “This is shameful. This issue is a huge challenge to the financial services industry.”

And yet, those designations break down a senior’s resistance, Liebig said.

“If you put ‘senior specialist’ on your business cards or fliers, seniors think you have more expertise in that area so they can be more comfortable in dealing with you,” she said.

What the Senior Investor Protection bill proposes is to bar advisors from using credentials that have not been verified by an accredited institution, such as a college or university, or by a nationally recognized accrediting institution.

By and large, valid designations -- such as certified public accountant, certified financial analyst or certified financial planner -- require years of study and continuing education. They also demand that the advisor adhere to published ethical standards.

Such is not the case with many of the designations currently being touted. Indeed, one organization spotlighted in the Senate hearing issued its “seal of trust” to anyone willing to pay a fee and fill out a five-minute online application, Galvin said.

This seal purports to indicate that the bearer adheres to high ethical standards, but a Massachusetts investigation found that one advisor who was granted this seal had a record of regulatory sanctions, customer complaints, liens and a bankruptcy. Another had been fired by his broker-dealer for selling unapproved products.

Although the proposed law would eliminate the ability of advisors to use such misleading designations, experts caution that it’s a long way from passing and it’s likely to take longer still to implement. The reason: The bill doesn’t set national standards; it proposes to create a grant program to fund state efforts to set up and enforce uniform accreditation standards. Only Massachusetts has such a law on the books today. It could take years before every state adopted similar standards.

In the meantime, seniors need to be wary. If an advisor touts his credentials, be sure that you understand what they mean, said Barton. And if you’re slightly suspicious about any product someone tries to sell you, get a second opinion.

“Ask questions,” Barton said. “Don’t hand over your life savings to someone you haven’t thoroughly checked out.”

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