Annuity and Life Insurance Scams Target Senior Citizens

Elderly investors are increasingly being taken advantage of by fraudulent salespeople selling annuities and life insurance policies. The Financial Industry Regulatory Authority (“FINRA”) has been educating seniors on how to best protect themselves against those looking to financially exploit them. Gerri Walsh, Senior Vice President of Investor Education at FINRA, says that asking the right questions is crucial.  Important queries include whether the investments registered with the Securities and Exchange Commission (“SEC”) or a state regulator; whether there is a fee associated with the investment; and whether the investment can lose money, among others.  If the salesperson’s answers do not ring true, and cannot be verified, that should raise an immediate red flag with the investor. Also, details regarding the investment should be provided to the investor in writing.

Walsh also points out that transparency about fees is very important. Investors should not only ask about commissions and fees paid to the person offering the investment opportunity, but also early withdrawal fees if the investor needs to withdraw money from the investment before a certain benchmark.  In addition to asking questions of the salesperson, it is equally important for investors to ask themselves questions, such as whether they understand the product and whether they are withdrawing cash without seeing adequate documents.  If the investor does not understand the product and is not being shown proper documentation, that may be a sign that the salesperson is trying to exploit the investor.

Walsh suggests conducting background research on the salesperson by utilizing FINRA’s BrokerCheck, which is a website tool that allows visitors to search for FINRA-registered brokers and brokerage firms, as well as their employment and registration history, and any disputes in which they have been involved. New regulations require financial advisors to include a link to BrokerCheck on their website. Investors can also confirm a salesperson’s registration with the insurance and securities regulators in their state.

Lastly, Walsh suggests knowing the techniques that fraudulent salespeople use in trying to coerce business from possible investors, including “dangling the prospect of risk-free wealth; providing something such as a ‘free’ meal or special offer that makes you want to reciprocate; and creating a false sense of urgency to ‘act now.’”  Many advocates have urged Congress to allow financial investors to protect clients from elder fraud by having the ability to pause disbursements of funds if there is a reasonable belief that financial exploitation exists.  More information can be found here.

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About Christine Goodrich

Christine E. Goodrich is a Senior Associate with Faruqi & Faruqi, LLP’s New York City office.  Ms. Goodrich’s practice is focused in securities arbitration, litigation and regulation.

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