The New York Times featured an article last Sunday that was infuriating.  It dealt with unscrupulous “financial advisors” who prey on unsuspecting elders.  One effective tool that is used is a professional designation.  More often than not, the designation is purchased and has no substance except to mislead.

The product most often associated with this process is the index annuity.  As usual, the impression is that all annuities are bad, and so are the people that sell them.  This is completely false – there are perfectly good annuities and many ethical and honest representatives.

What can be done to protect seniors from being victimized?  Regulations have not worked; too many people are content to ignore the rules and hope they don’t get caught.  Candidly, the regulations that exist are tame, and the cost of ignoring them is modest.

The first defense is information.  Seniors need to be proactive in ensuring that they understand what they are buying or investing in before they act.  This is often difficult, since many seniors are relatively unsophisticated in financial matters.  There are some basic questions that can be asked that will help prevent swindles.

How long do I have to leave my money in this investment?  Show me that in writing.  What have been the results produced by this product for previous buyers?  Show me that in writing.  What are the surrender charges if I need to withdraw the funds?  Show me the surrender schedule.  Give me the names of three of your clients, along with phone numbers.

Finally, insist that you be able to obtain a second opinion, much like recommended for medical treatments or procedures.  That opinion may come from your accountant, a trusted friend or advisor, or even a competitor.  There is no better way to learn all about an investment product than to ask someone who sells them to review the proposal you have received.

We are often asked to evaluate proposals for friends and relatives of current clients.  The premise is not to make a sale, but to provide an unbiased viewpoint and impart information.

We invite inquiries from readers.  Please contact us at www.associatesgroupinc.com or anadolna@associatesgroupinc.com