Tags: Fraudulent | seller | seniors | scams

'Fraudulent Seller, Needy Buyer': Seniors Targeted by Scams

By Michael Kling   |   Sunday, 21 Apr 2013 10:24 AM

Frustrated by low returns of traditional investments, seniors are increasingly being tricked to put their money into risky schemes and scams.

Many seniors often put most of their savings in safe, low-yielding investments like back certificate of deposits and government bonds. With rates of return barely keeping pace with inflation, they worry they will outlive their retirement savings.

Those fears make seniors prime targets for scammers.

At the start of the recession, Americans 65 and over got about 10 percent of their income from their investment earnings. In 2011, that figure had dropped to 6 percent, according to The Washington Post.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

Seniors are relying less in investment income and more on pensions, Social Security, and public assistance.

“What we really have now is a combination of the fraudulent seller with the needy buyer,” A. Heath Abshure, commissioner of the Arkansas Securities Department told the Post. “Right now, because of interest rates, the fraudulent sellers aren’t having any issues finding a buyer who wants to believe the lie,” he said

Many complaints involve annuities. Brokers can earn large commissions from selling annuities, which are insurance contracts with fixed payments and penalties for early withdrawals, but they are not well-suited for seniors, who need to quick access to savings.
Scams may involve high-yielding CDs, promissory notes and unregistered real estate investment trusts. Signs of a possible scam include free-lunch seminars and requirements to invest immediately.

People 60 years and older make up 15 percent of the population yet are estimated to account for 30 percent of investment fraud victims, according to the Consumer Financial Protection Bureau.

Seniors are prime targets for scammers because they are typically wealthier than younger people due to retirement savings, inheritance, and home equity. They may also experience cognitive decline as they age, which can impair their ability to analyze financial options.

"They can be lonely or overly trusting, and we now have many ways for perfect strangers to communicate with them, often taking advantage of their trust," said CFPB Director Richard Cordray.

The large number "senior designations" financial advisers use can confuse seniors who are already at risk of being misled, Corday said.

With more than 50 designations, consumers risk paying for an adviser they believe has a breadth of experience, but who, in reality, simply paid a website for multiple designations.

The bureau recommends training standards, standards of conduct, and greater supervision and enforcement.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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