“Too Good to be True”
People of all ages run the risk of being taken advantage of by those that they should be able to trust; today, many professions that historically offered solely one service to consumers now mix the types of services that they provide to their customers. For example, bankers used to be bankers, insurance brokers used to only sell insurance, and investment advisors used to help you with stocks, bonds, and mutual funds. In the past, all of these professions had separate ethical codes and regulations. Today, professional barriers no longer exist, and the lines among different financial services are blurred. Now, your banker wants to be your insurance broker at the same time that he is your investment advisor; likewise, old investment firms want to act as both your banker and insurance broker and insurance companies offer banking and other financial services. Before the offering of these “mixed services,” you knew that the advice of professionals in their individualized industry was coming from men and women who were well trained and knew their stuff for that particular service and had ethical guidelines that applied specifically to that service. But today you get all of these services in one place with “one stop shopping,” and the lines are now so blurred among these old professions that you can’t know that you are getting the best advice for your personal situation, because the advice may be coming from a professional with conflicted interests or with strengths in one area, but weaknesses in the service being provided to you.
Privacy is an important concern for families with these professions offering different types of services. Banks, for example, have direct access to your private, personal financial information, with which they are able to recommend that you visit their in-house investment firm, often pushing you to buy some of their products. When you visit the investment side of the bank, insurance salesman will push you into buying an annuity, which is an insurance product that sounds really good. Annuities can be horrible investments for many seniors, due to the fact that the contract gives total control of your money to the insurance company for them to give it back to you in small dribbles. The annuity may act as a good income stream with wonderful sounding guarantees until the senior needs access to his or her money all at once for a crisis situation. If you ask for your money back, all the guarantees go away and you face a large penalty for its removal from the contract. Often, seniors will get back far less than they originally invested. Regardless of this drawback, insurance salesmen (who make good commissions off of each sale) will convince seniors to buy such products, despite the fact that they are not always in their best interests. It is often hard for people to protect themselves against this type of advice when they believe it is coming from a good or “trusted” source.
Seniors and those who are more vulnerable have a propensity for getting scammed, because they want so badly to believe things that sound too good to be true. AARP wrote a powerful article in 2012 about so-call professionals scamming older veterans by selling them on annuities for public assistance purposes. These VA Pension annuities are seldom helpful and often hurt those veterans and their families. The NC Attorney General Consumer Protection Division also has material published on product sales as scams against seniors. Annuities can be useful and appropriate investments for certain people at certain times. Like most investments, it comes down to your specific situation and needs. It is never a “one size fits all” situation. Unfortunately, annuities tend to be the biggest money-maker for financial professionals and the most abused financial product hawked to seniors looking for safe investments.
Seniors are a special group because as we grow older, we often process information a little slower and sometimes become too trusting. Seniors not only hold most of the wealth in the country, seniors are also more susceptible to being scammed by scam artists as well as “professionals” just trying to make a sale.
Now more than ever, we must use sound judgment and be skeptical. Seniors should never allow others to push them into making a quick decision regarding money, and seniors should seek additional guidance from family members or other professionals before writing a big check. Never forget the classic rule that if something sounds too good to be true, then it’s untrue; or at least there is a catch that makes it far less attractive than it seemed at first blush. When it comes to insurance, and particularly annuities, remember that insurance companies offer every product to make money for themselves; the investment issue has to do with risk. If shifting a particular risk to an insurance company is in your best interest, then it can be a very good investment for you; otherwise, it may be a very poor decision.
Remember that much of your wealth is no longer private—it’s out there in the public domain and can be used to scam you. It’s obvious to many when you receive a call that you have won a lottery if you will just pay the tax immediately or a stranger passing by offers to clean your gutters for free, that there is a hidden agenda, but less obvious from an acquaintance at your church or someone at your bank. Ask questions, be cautious, and frequently use a very powerful word—“No”!
Don’t let your loved ones be taken advantage of by untrustworthy people. Contact an experienced Elder Law attorney today to help you learn to recognize the classic techniques of scam artists and how you and your loved ones can avoid being made victims. Contact W.G. Alexander & Attorneys for more information.
Attorney Bill Alexander discussed these issues and more this past Tuesday on W.G. Alexander & Associates’ radio program, “Asset Protection Today,” on TalkRadio 850 WPTK (AM). Be sure to listen every Tuesday morning from 9:00-10:00 AM. To listen to this week’s show, please visit WPTF’s on demand show blog by clicking here.