Bucks Blog: A Financial Self-Defense Guide for Older Americans

The board that oversees the certification of financial planners has developed a guide to help older Americans avoid fraud and abuse.

The guide, “Financial Self-Defense for Seniors,” was developed by the Certified Financial Planner Board of Standards, a nonprofit group that administers the credential for “certified” financial planners. To earn the “certified” designation, financial professionals must meet certain requirements for education and experience and pass a difficult exam on a variety of financial topics.

The new guide lists “red flags” to watch for, and offers advice for vetting financial professionals before you sign up to work with them. It suggests, for instance, asking if, in offering advice, the adviser is required to use the “fiduciary” standard. That standard obligates the professional to put the client’s interests first and to fully explain any conflicts of interest that might affect the advice provided to you. (All planners with the “C.F.P.” designation must adhere to the fiduciary standard, the board says.)

Here are other tips from the guide:

• Ask the professional what organizations supervise his or her services. Brokers, for instance, are supervised by FINRA, the Financial Industry Regulatory Authority. Those who offer investment advice are overseen by the federal Securities and Exchange Commission or a state securities regulator. You can check with those organizations to see if the adviser has a disciplinary history. (The guide offers a list of resources, including steps for filing a complaint.)
• If you don’t understand a product, don’t buy it. Ask what risks it involved, and make sure you understand the answers.
• Don’t allow a professional to visit you at home. If you’re considering working with someone, go to the business location — and take a friend or family member with you, to listen to the conversation and discuss it later.
• Get a written description of the risks and benefits of any investment you are considering.
• When filling out paperwork, don’t leave blanks that could be filled in without your knowledge or consent. And make sure you request a copy stamped “final” for your review.
• Ask the professional, “What do you get paid if I make this investment?” The fact that adviser gets a commission doesn’t necessarily signal a problem, the guide says, but if the benefits to you aren’t sufficient to justify the payment, you may want to look at other options — and for someone else to work with.
• When considering a reverse mortgage to tap into home equity, make sure it is backed by the Federal Housing Administration.

Have you had an experience in which you were misguided by a financial adviser? What did you do?

Article source: http://bucks.blogs.nytimes.com/2013/03/28/a-financial-self-defense-guide-for-older-americans/?partner=rss&emc=rss