It seems that there is no end to what unscrupulous financial advisors will do to line their own pockets at others’ expense. One does not need to be elderly and frail to get taken advantage of by someone you trust for financial advice. This debacle happened to a working widow in her 60s with limited assets. She had an IRA, though she depended on her job as her primary source of income. She trusted the institution where she had her IRA to give her ethical guidance on what to do with her modest retirement funds.
They told her to put her money into oil and gas securities, real estate investment trusts and junk bonds. None of these would be right, under any circumstances, for a widow in her situation, as all are high risk. Why would the financial advisor do this? To get the high commissions associated with such products, of course. Did the firm care about the client? Of course not. She incurred $67,000 in trading losses, as reported in On Wall Street, Financial Planning. This is an older piece, but if you search today for similar situations, you will find them almost daily. When their own industry takes action, the punishment is too light. They keep at it, as profit outweighs the fine imposed.
https://www.thinkadvisor.com/2023/02/02/finra-suspends-fines-2-ny-brokers-over-reg-bi-infractions/?kw=FINRA Suspends, Fines 2 NY Brokers Over Reg BI Infractions&utm_source=email&utm_medium=enl&utm_campaign=compliancewatch&utm_content=20230203&utm_term=tadv
This widow was fortunate to find an attorney to go after the institution in the least expensive avenue available to her: a limited Financial Industry Regulatory Authority (FINRA) arbitration. She was limited there to a maximum possible award of $50,000, less than what she lost. However, she chose this way because in any arbitration other than a limited one, she would have had to miss several days from her receptionist job and she couldn’t afford it. She didn’t want to lose her job while pursuing her rights.
Her case turned out well. She was awarded the $50,000, plus $20,000 in attorney’s fees, as well as the cost of her filing fees of $600 and interest on the amount owed to her until paid in full. This was decided by a single arbitrator without a hearing.
First, if you have older (past age 60) parents who are employed and want to keep their jobs, there is likely a need for them to keep working. Many Boomers plan to continue working for some time, as their retirement savings are insufficient to totally support them. They may have IRAs or other retirement plans that allow them to choose their own investments. If your communication with your older loved ones is open and we hope it is, ask about who is giving them guidance about investments. You, as a family member need to know. What happens to their money can affect you directly down the road. Ask to see the portfolio and what investments are in it. Get a second opinion if it doesn’t look right.
Next, remember that the financial services field has many excellent folks in it giving ethical advice. And it has bad apples too, like the one that chose high risk products for a working widow of modest means. Not everyone recognizes what a high risk product is, so finding out is essential. You, as an adult child or other family need to monitor what happens to your loved one’s money. Get a second opinion as to the suitability of the investments your loved one purchased. Imagine that the widow in this true scenario is your mom, grandmother or someone close to you. If she ran out of money altogether, who would support her? Would it be you? That may be a motivator to get involved if you are not paying attention to this loved one’s finances already.
Finally, if you learn that any advisor, planner or manager has put your family member’s assets into investments that are not at the right risk level for their age and circumstances, persuade your loved one to fire them immediately. There are many high quality other advisors out there who will do the right thing. They have a fiduciary duty to do what is in the client’s best interests. One guideline, though not a guarantee, is that the advisor is a Certified Financial Planner or Registered Investment Advisor with a requirement to put the client’s interests first, and above their own interests. The institution that got hit with the arbitration award against them certainly put their own interests first in this case.
When your aging parents won’t share any financial information with you, that can lead to great danger as they age. Don’t wait for a crisis created by avoiding the subject. Call today for an appointment at AgingParents.com, 866-962-4464. Our nurse-lawyer, psychologist team is at the ready to help you find ways to break through the resistance in communication with aging loved ones.
Carolyn Rosenblatt, RN, Attorney, AgingParents.com