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Subtle Ways Scammers Target Seniors

MICHEL MARTIN, HOST:

And now to matters of personal finance. We've probably all heard of seniors who've been victimized by investment schemes, credit card and life insurance scams. It turns out that some of this has to do with who seniors turn to for financial advice. If you do an Internet search of the phrase financial advisors for seniors, you might find 50 different titles, including certified senior advisor or elder care asset protection specialist. But it's hard to know if these so-called experts actually have the proper training and accreditation to help seniors with their money.

So Congress asked the Consumer Financial Protection Bureau to look into this. They did, and they have a new report out. Here to tell us more is Stacy Canan with the Consumer Financial Protection Bureau. She's here with us in our Washington, D.C., studios. Welcome, thank you so much for joining us.

STACY CANAN: Thanks, Michel, nice to be here.

MARTIN: So let's take a step back here and talk about how many people you think are affected by confusion over these kinds of designations.

CANAN: Well, I'll tell you right now there are 50 million seniors in the United States. So potentially, you know, a large portion of them...

MARTIN: All of them, it could be all of them.

CANAN: Exactly right. And not only that the demographics are dramatically changing. So the problem is just going to continue and continue unless something is done about this.

MARTIN: Is it your view, is it the view of the agency, that there are people who are actively trying to mislead seniors that they have some special expertise, and they don't? Or is this a matter of marketing, that people are just trying to signal that they're particularly interested in helping seniors? I mean what do you think it is?

CANAN: Well, that's a really good question. So, two parts. The first is yes, there absolutely are some financial advisors that are using the designations just for marketing purposes and they don't really have the substantive expertise and training to back up what that designation implies to investors. And then there are some who, yes, who want to market to older investors and help them.

And matter of fact, when we were preparing the report, someone once mentioned to me, well, you know, are you going to be recommending that all these senior designations be prohibited or banned? And our answer, of course not. You know, older people do need sound financial advice. What we said and what we found in the report is that the problem is when there isn't any transparency.

MARTIN: I think it's fair to say that a lot of people are confused by the designations of people who present themselves as financial advisors. Is there something you're particularly concerned about with seniors?

CANAN: Well, what we're concerned about, I'll tell you, this is what we know. We know that people today who are entering into retirement are less well-off than people were years ago. They've saved less; they're carrying more debt into their retirement years. They're in some ways sort of desperate to make sure that whatever money they have, large or small, that it's protected, that it's invested wisely.

And we also know that they are unprepared for handling the kinds of financial decisions that have to be made. So we know that they're going to be turning to financial advisors more and more.

MARTIN: Well, are they more likely to be victims of fraud than other segments of the population, for example?

CANAN: Oh, absolutely. What we know, and we cite this in the report, the AARP did a study showing that the mean age of someone who has suffered from investment fraud is 69 years old. Older people are actually being targeted for this kind of bad practices.

And just so that I'm clear. You know, what we found is not that all financial advisors in fraudulent conduct. That is a problem, however, that that has been reported. Other regulators in the industry have found some really egregious instances of fraud. But it's also that seniors deserve the right to understand whether they're entrusting their life savings to someone who's only had a weekend seminar versus spent months or even years of training to learn how to give adequate financial advice.

MARTIN: Why do you think it is - or does the report indicate why it is - that seniors are disproportionately more likely to be targeted for this kind of behavior? Is it because they are more likely to seek advice? Is it because, you know, or is it that old - it's not a joke but, you know, why did, you know, the famous bank robbers rob the banks, because that's the money is, that they're more likely to be targeted because the assumption is that they have, in fact, a lifetime of savings, and that's kind of a juicy target for people. Or are they more trusting?

CANAN: Well, it's really both, but definitely the first point mostly is that there is $18 trillion net worth of seniors today, you know, that they've either saved, it could be in 401(k)s, in life savings, in home equity. So there is a lot of money. And then when you combine with the fact that as people are retiring, and they're looking at whatever money they have set aside and the fact that we no longer have that so-called three-legged stool that helps protect people in their retirement years, which was Social Security, a pension and life savings.

Now we fortunately still have Social Security, but there are no pensions. Now there are defined contribution plans, 401(k)s, and the savings now have been transferred into debt. So, you know, seniors have mortgages, they have credit cards, they even have student loan debts that they're carrying with them. So all of those reasons.

And I will add, this is really critically important, people are not estimating correctly their longevity and how many years they're going to be in retirement. So when you mix all these factors together, it's sort of the perfect storm.

MARTIN: So what do you recommend? I mean, what is it that, you know, all these factors coming into play here, what do you recommend?

CANAN: Well, what we recommended in the report is to improve the standards for acquiring how you obtain one of these designations that has to do with education, prerequisites, qualifying examinations, things of that sort, accreditation, and then improving the standards and consistency of the conduct of the financial advisors holding these designations.

Seniors in particular often mistakenly believe that their financial advisor is looking out for their best interest. That is rarely true. Often, they are trying to sell a particular product, or they may be using - advising or recommending a product that is perhaps suitable but not necessarily the best product. So that's why we would encourage investors to ask, ask their advisor: Are you looking out for my best interest? What duty of care are you bound...

MARTIN: How do you get paid? How do you get paid?

CANAN: That is a critical question to ask is how are you paid. You know, do you receive a commission from the sale of this particular product? Is the investor receiving notices of any conflicts of interest, which is typically what should happen if there is such a conflict of interest?

MARTIN: Stacy Canan is deputy assistant director at the Office for Older Americans. That's at the Consumer Financial Protection Bureau. She was kind enough to join us in our studios in Washington, D.C. Stacy Canan, thank you so much for speaking with us.

CANAN: Thanks so much, Michel.

(SOUNDBITE OF MUSIC)

MARTIN: Coming up, those college admissions letters have been coming in, and millions of students are now facing decisions on where to spend the next four years. But increasingly it seems the party atmosphere is part of that decision-making process. We'll talk with our roundtable of parents to ask what they're telling their college-bound kids to help them stay in class and out of drama. That's ahead on TELL ME MORE from NPR News. I'm Michel Martin. Transcript provided by NPR, Copyright NPR.

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