October 22, 2010
Over the past ten years, I’ve been involved with reviewing the state of the investment industry and have come across many unfortunate situations that have not ended well for the investors and involved. During this time I’ve come to realize that seniors are ideal targets for wrongdoers because they‘ve accumulated considerable assets and have unique vulnerabilities that can be exploited by the unscrupulous.
In a hearing before the U.S. Senate Special Committee on Ageing
on Telemarketers targeting older adults, Edward Bruce Gould Jr., a convicted telemarketer, said the following:
“In the case of senior citizens, who in most cases, had their lives affected by having lived as children or younger adults through the Great Depression, the key is to work on the greed and insecurity caused by those times…because most senior citizens are more trusting of supposedly “caring” strangers, because they grew and matured in less threatening times, they are incredibly easy to con out of everything they have.”
This trust is one of the key factors making seniors a attractive target.
In a U.S. research paper titled Fraud, Vulnerability and Aging
that was published in Alzheimer’s Care Today in September 2007, Dr. V. Templeton and co-author D. Kirkman claim that defrauding older consumers has become a multi-billion dollar industry. This particular paper focuses on memory disorders but seniors without any disorders are also targets for scammers, fraudsters and regular “advisors” .
A recent Investment Funds Institute of Canada Investor Survey found that older investors (56% of those 55 and older) are more likely than younger investors (43% of those 35 to 54) to say they make the decision jointly with their advisor. Younger investors (45% of those 18 to 34,) are more likely to say they seek information from their advisor but make the decision themselves (compared to 30% of those 55 and older). Advisors play a major role in the financial seniors’ decisions. They can be a source of sound advice but they can also bring much grief.
According to the Ombudsman for Banking Services and Investments ( OBSI ) , about 40 % of complaints originate from seniors. I suspect the elderly statistics are distorted as it has been my experience that the elderly are especially reluctant to formally complain for a variety of reasons. Seniors often avoid publicity or litigation due to the embarrassment of having been bilked. They may unduly blame themselves for losses, be reluctant or unable to formulate a complaint or even be unaware that something is amiss. Sometimes a curt letter from a dealer merely asserting that the firm did no wrong is enough to dissuade a senior or retiree from pursuing a legitimate complaint. As of yet we have no national database on financial elder abuse.
Attempts by seniors to obtain restitution for bad advice have generally led to more stress, legal expenses and aggravation. This is another major problem .Dealers and brokers tend to draw the complaint process out, eating up a significant amount of a seniors’ remaining years. Regulators have taken the naive view that civil litigation is the best investor protection.