Carrying an unloaded tommy gun, Willie Sutton held up more than a hundred banks in the first half of the 20th century. When someone asked him why he robbed banks, his memorable answer? “That’s where the money is.” As America ages, more and more money will be held by older people, who usually don’t have a vault or security guards to protect them. In place of stick-ups at the local bank branch, I foresee an increase in fraud directed at these folks.
The trend is already strong enough to alarm regulators. If you’re not familiar with the difficulty older people have in fighting scams and rip-offs, imagine yourself out of the mainstream of change in your 70s or 80s, trying to navigate a complex world without being preyed on, stolen from, and robbed of your sense of security and safety.
As advisors, you are likely to have more opportunities to help clients protect their parents from fraud, or to assist others who have already been burned to overcome their feelings of anger and distrust. Here are some examples.
Q: A widow in her mid-70s was referred to me after having had a bad experience with her previous advisor, who persuaded her to cash in a $300,000 life policy and buy a fee-heavy variable annuity with a lengthy surrender period. She’s distraught and blames herself for having “lost” the inheritance she planned to leave her children. I may be able to help her get out of the unsuitable VA, but so far she has resisted giving me a go-ahead. Is there a way to speed up the process of gaining her trust?
A: Your client appears to have been “frozen” by the financial and emotional trauma she has been through. Instead of trying to hurry her into a decision, I would take time to empathize with her feelings of betrayal by someone she trusted, compounded by her sense of shame that she allowed herself to be duped. Reassure her that she is neither “stupid” (a term I wager she is applying to herself) nor unduly gullible for having followed her previous advisor’s recommendation.
Then I would ask her what she needs to know in order to be confident that you’re not just like him. Answer all her questions patiently, and offer to put her in touch with other clients in her age range whom you have helped. If you’ve ever rescued a client from a similar misguided move, see if that client would be willing to talk with her.
To help gain her trust, you might also educate her about ways to defend herself against other kinds of financial traps. AARP has an excellent library of articles about various frauds, from car crashes to the Nigerian money scam (www.aarp.org/money/wise_consumer/scams). You might direct her to this site, or print out some of the articles for her if she’s not computer-savvy. Take care, though, not to go overboard with scare stories that might just serve to convince her that the world is consipiring against her.
As your client sees the time and energy you are willing to put in and the lengths to which you will go in order to assist her, I believe she will gradually “unfreeze” and let you rectify her misguided decision.
Q: The worse the economy gets, the more ads I see for debt consolidation schemes, easy-credit loans, and tax avoidance “secrets”–most of which are nothing but scams to get people to part with their money. It bothers me that no one is doing anything to stop these fraudsters. I hardly have time to stay in touch with my own prospects, let alone help folks who aren’t likely to ever use my services, but I keep asking myself if our advisor community doesn’t have some responsibility to educate people. What do you think?
A: An excellent question! I agree, this is an awful state of affairs, and few people are better suited than a principled investment advisor to ameliorate it.
You might join forces with one or two trusted colleagues (perhaps an insurance professional and a lender) to put together a free seminar on “How to protect yourself from fraud.” See if you can enlist the support of a local civic organization to sponsor and advertise the event. If it’s difficult to justify spending time on a pro bono activity, consider the benefits of being associated with this kind of leadership effort. Some prospective clients are bound to hear of it and think well of your willingness to help.
On an individual level, you might consider enlisting in a free phone consultation program that Kiplinger’s and NAPFA offer periodically. During the two or three days that the program runs, consumers can call in and ask an advisor about financial matters. One of the recent volunteers for this phone bank was Donald Lord, a financial planner with the Family Firm in Bethesda, Maryland, who told me he found it both fulfilling and jarring. What jarred him was discovering how willing the callers were to trust someone on the other end of the phone whom they had never met or even heard of, and how open they were in divulging personal financial information.
This tells me that many people desperately want help with their finances, and also that they need enough information to be sure their advisors are trustworthy. You and your colleagues are in an ideal position to accomplish both.