The Securities Industry and Financial Markets Association shared some harrowing facts about the aging American population and the continued threat of financial exploitation of these seniors.
Nearly one in five Americans aged 65 or older have been victimized by financial fraud. However, it is estimated that only one in 44 cases of financial elder abuse is reported.
With roughly 10,000 Americans turning 65 every day for the next 15 years, these problems are not going away any time soon.
During a panel discussion at SIFMA’s Senior Investors Forum on Tuesday in New York, representatives from three different regulatory powers – the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority’s Board and the North American Securities Administrators Association – discussed how they are responding to the growing threat of elder abuse.
Joseph Borg, director of the Alabama Securities Commission and prior two-time president and current board member of NASAA, says the fight against financial exploitation of seniors still has a ways to go.
“This is an emerging area,” he said. “This area of financial exploitation of seniors is at the stage now where drunk driving was 20 years ago. No one had drunk driving issues 20 years ago but look what happened when [Mothers Against Drunk Driving] got involved and now nobody puts up with drunk driving anymore. Financial exploitation of seniors is where drunk driving was 20 years ago and it’s going to take time.
Here are three areas where regulators see room for improvement:
What’s So Wrong With a Free Lunch?
Free lunch programs, which are no new marketing technique, are still a problematic area for seniors that regulators continue to target.
Borg said free lunch programs or seminars have “always been a rather big issue” for NASAA state regulators.
“We see it on a local level,” he said. “We’re usually the first ones to get the call, ‘Hey I got this free lunch seminar.’ I know in our state and in other states we’ve had things like [a program] where we actually had folks got these notices, go and take notes for us.”
Borg called them “undercover agents.”
Because of this and other regulations, Borg has seen a shift in the free lunch programs.
“We’ve seen a definite shift – I think most of the lunch programs we see now that cause us problems are probably independent insurance agents selling certain products or whatnot and perhaps out-and-out frauds on the other end of the spectrum,” Borg said. “I think there’s’ been less of the lunch programs by what I would call the regulated communities. And I think that has to do with the recognition of the supervision issues and script reviews and things of that nature. I think that’s been a lot more controlled.”
What Borg has also seen is a shift from using the lunch seminar as a primary marketing tool to now using it as an introduction to identify and target specific seniors on a one-on-one basis. He called this a “real danger.”
From the SEC perspective on free lunches, Goodman implied it continues to be an important issue.
“We have seen during our examinations a strong correlation between using the free lunch seminars and successfully selling the high-commissioned products,” Goodman said. “We also see those used primarily to attract senior investors and often if you look at the invitation – although it might not be problematic on its face – it stresses things that we all suspect are not the real focus of the invitation. It’s talking about ‘How to Maximize Social Security’ and ‘How to Engage in Estate Planning’ that might have very little to do with the products that are actually being sold.”
If the SEC sees that free lunch seminars are being heavily used it will conduct an exam.
“I think there is an undeniable correlation between conducting [free lunch programs] and higher incidents of problematic behavior,” Goodman said. “I’m sure they’re used in a lot of cases as a very legitimate way of getting before the customers that one would need to get before. But we have used them as a targeting technique for examinations and we do see that correlation.”
Designs on Senior Designations
One of the things that regulators focus on heavily is marketing. And, senior designations or senior-specific titles is a way that some firms market their services that could be an indicator of a potential problem.