Protect Yourself: A Primer on Financial Abuse and Fraud Against Senior Investors

Senior financial abuse and fraud continues to be one of the most prevalent and “lucrative” enterprises in Canada.  Approximately 30-35 % of all complaints received by regulators involve seniors.  I suspect the elderly statistics are distorted as it’s my experience that the elderly are usually reluctant to formally complain for many reasons.  Seniors often avoid publicity or litigation due to the embarrassment of having been bilked.  They may unduly blame themselves for losses, are reluctant or unable to formulate a complaint or unaware that something is amiss.  A 2007 Canadian Securities Administrators Investor Study: Understanding the Social Impact of Investment Fraud, estimates that over one million adult Canadians have been the victim of investment fraud.  The study shows it is a common occurrence in the lives of many Canadians, with almost one-in-20 having been victimized.

1. Check registration:  Engage with registered dealers and advisors with good reputations.
2. Don’t fall for investments that promise “guaranteed” or exceptionally high returns: If an investment seems too good to be true, it probably is.
3. Avoid investments that are advertised as “risk free”:  All investments have risk.  As a general rule, the greater the potential return, the greater your risk of losing money.
4. Don’t be rushed into an investment by high pressure sales tactics:  Always take the time to evaluate and understand an investment before purchase.  Always be leery of “once in a lifetime” opportunities, or investments that are only available “for a limited time.”
5. Be wary of inflated titles:  A few advisors may use inflated titles to market themselves such as Vice President and the like.  Too often, these are meaningless.  Don’t be lulled into complacency or be intimidated by the titles.
6. Be wary of professional designations:  Some advisors may use professional designations to market themselves as retirement or senior specialists.  While most professional designations require rigorous study or extensive education or experience, some may be relatively easy to attain, and may even be available to individuals with no  experience.
7. Avoid “free lunch” financial seminars for seniors:  These seminars may be carefully scripted sales presentations designed to prey upon seniors’ fears.  Some of these seminars may pitch investments that may be unsuitable.
8. Make sure that you clearly communicate your investment objectives to your advisor:  Don’t let them steer you into investments that are not in line with your investment objectives or time horizon.  Seniors typically live on fixed incomes and need conservative low risk, income-supplementing investments.  Most importantly, closely review any document you are asked to sign, especially those with “investment objectives” and/or “risk tolerance” information about you.
9. Never sign a blank or incomplete document:  Always take the time to review documents you are asked to sign, and ensure the document is filled out completely.
10. Never give cash to a financial or securities professional:  When making an investment, use a method of payment that can easily be tracked.  Make payments only to the registered dealer, NEVER to an individual.
11. Avoid any personal financial dealings with your advisor:  You are not a bank so don’t start lending out money.
12. Get a second opinion:  If you have questions about an investment and the advisor fails to fully or satisfactorily explain things, consult a different financial professional.
13. Ask questions:  Some advisors may use language or jargon with which you may be unfamiliar.  If you don’t understand something, ask for a clear explanation.
14. Don’t be afraid to contact your provincial securities regulator:  Every province has a Commission/agency devoted to protecting people financial abuse and fraud.  Contact your provincial securities regulator if you suspect you’ve been targeted as part of a financial scam or cheated in some way.

The following are the most basic questions that seniors, and investors in general, should ask when facing the decision to make an investment:

· Do you have a fiduciary duty to me?
· Can you explain the investment to me without using industry terms or jargon?
· What risks are associated with the investment/program?
· What are the investment cost in terms of commissions and fees?
· Are there additional or ongoing fees?
· Are there surrender charges associated with this investment?
· What happens if I decide to sell or cash in my investment?
· What are the pros and cons of this product re taxation?
· Why is this investment suitable for me?
· What type of reports will I receive and how frequently?
· How easy is it to sell or convert the investment to cash if I need money quickly?
· What happens if I have a complaint?

If the salesperson can’t or won’t answer your questions in writing and to your satisfaction, the investment may not be right for you.  Ask questions and stay informed about your investments.  Seek help if you believe you are being targeted or have been a victim of financial fraud or abuse.  Some light reading to protect your assets:

Understand Investment Jargon The Steadyhand Investment Dictionary http://steadyhand.com/forms/2014/03/07/steadyhand%20dictionary.pdf
Pursuit of a Financial Advisor Field Guide – v13 A MUST read for retail investors.
http://www.napfa.org/UserFiles/File/FinancialAdvisorFieldGuidev13.pdf
The Responsible Investor  http://faircanada.ca/wp-content/uploads/2011/03/The-Responsible-Investor-MoneySaver.pdf
Is Your Advisor to Blame? Things to consider when filing a complaint. http://www.robertson-devir.com/pdf/Is%20Your%20Advisor%20to%20Blame.pdf
Financial Fraud and Abuse Against Seniors | SecuritiesLawFirms.com http://www.securitieslawfirms.com/resources/securities/fiduciary-responsibility/financial-fraud-seniors.htm