Depending on which state you live in, an “elder” or “senior” could be defined as “any person residing in this state who is 65 years of age or older.” FINRA points out that it does not have special rules for senior customers, however the NTM lays out a number of important factors that should be considered when working with a senior.
NASD Rule 2310 requires that in recommending “the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable” for that customer, based on “the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs.” The rule also requires that, before executing a recommended transaction, a firm must make reasonable efforts to obtain information concerning the customer’s financial status, tax status, investment objectives and “such other information used or considered to be reasonable by such member or registered rep in making recommendations to the customer.”
I can imagine that right now those of you who are not registered are saying, “so what, this doesn’t apply to me.” Well think again. Did you get your Series 65? Are you in a state that has determined that merely recommending the sale of a security (such as a mutual fund) to purchase a fixed product constitutes engaging in a securities business, which requires a license? Are you in a state that has adopted or beefed up the NAIC’s suitability requirements for seniors?
If so, you have a duty to consider the following: All clients are different, but as they age situations change. As an advisor you should do your best to continually (at least every 3 years) make an effort to update in writing the client’s time horizon, goals and objectives, risk tolerance, tax status, need for liquidity, age, life stage, and long term care needs or desires.