Insurance professionals could help avert trauma, pain and remorse by helping clients construct a Plan B should they carry debt.
By Cyril Tuohy
With 10,000 people retiring every day, evil-doers, scammers and criminals are licking their chops at the thought of preying on the vulnerabilities of older Americans.
As in other professions, the ranks of personal retail financial advisors have their fair share of bad apples.
But the stakes in financial services are much higher than in other industries. Crooks are tempted by the fruit of trillions of dollars sitting in assets held by elderly Americans.
Thomas L. Hafemeister, a professor at the University of Virginia School of Law, calls this generation of retirees “the richest elderly population the world has ever seen.” That makes the elderly a perfect target for corrupt financial advisors.
In the latest incident, the Securities and Exchange Commission (SEC) charged Donna Jessee Tucker, a broker with UBS based in Roanoke, Va., with allegedly defrauding elderly customers out of $730,298 to pay for cars, vacations and country club memberships.
Tucker allegedly sent clients their monthly statements electronically, knowing they would not be able to read them as some of her clients were legally blind, according to documents filed by the SEC in U.S. District Court.
Sharon Binger, director of the SEC’s Philadelphia office, said Tucker “befriended her customers and gained their trust, only to be stealing their money behind their backs and giving them phony documents to hide it.”
A UBS spokesman said the company had put Tucker on administrative leave.
The Financial Industry Regulatory Authority (FINRA) BrokerCheck database shows Tucker worked for A.G. Edwards & Sons from 2003 to 2007, and for UBS Financial Services from 2007 to 2013, and then resigned “while under review” following client allegation of misappropriated funds.
Variable annuities, which are more complicated than life insurance products or 401(k)s, are a favorite tool of the unscrupulous. The SEC often files charges against financial services professionals for scamming victims with annuities.
In March, the SEC charged investment advisor Michael A. Horowitz and broker Moshe Marc Cohen, four others and an advisory firm with selling variable annuities to terminally ill patients in nursing homes and hospice care in Southern California and Chicago.
SEC officials said Horowitz and Cohen reaped commissions on the sale of variable annuities to wealthy investors, designating the terminally ill patients as annuitants whose death would trigger the benefit payouts.
SEC regulators said that as part of last month’s settlement, Horowitz was barred from the securities industry and agreed to pay back more than $850,000.
“Horowitz devised a scheme in which he used terminally ill patients’ private information for personal gain, and misled his brokerage firm into approving the variable annuity sales,” said Julie M. Riewe, co-chief of the SEC Enforcement Division’s Asset Management Unit.
Financial schemes hatched by fraudulent middlemen are as old as the securities industry itself, but somehow defrauding the elderly, the terminally ill and victims who are particularly vulnerable strikes many as even more insidious.
With 80 million baby boomers moving into retirement, the number of elderly victims is likely to grow as boomers move into post-retirement years, and those retirees have trillions of dollars in wealth to their names.
Investment Company Institute data show U.S retirement assets reached $23 trillion at the end of last year. Much of those assets are held by retirees, which means that scammers bold enough to make off with a fraction of a percent of that number are themselves ready to join the ranks of the retired — so long as they don’t get caught.
A financial advisor capable of embezzling just one millionth of 1 percent of $23 trillion would abscond with $230,000.
Federal Trade Commission (FTC) data show an estimated 25.6 million Americans fell victim to some kind of fraud in 2011. Weight-loss products, billing services, credit repair, debt relief, credit card insurance and mortgage relief were among the top 10 fraud categories.
While general scams are almost commonplace — with 10.8 percent of the adult population finding itself victim of fraud in 2011, according to the FTC — wrongdoing on the part of individual financial advisors is less widespread, FINRA data show.
Last year, 429 individuals were barred from working in the financial industry and another 670 were suspended, according to FINRA data.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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