Submitted by: Donald McNeil, Esq. - Professional Issues Committee Member
That sound you are hearing outside your office are over 10,000 champagne corks popping every day as Baby Boomers retire. Each year, over 3.6 million Baby Boomer investors will turn age 65, with these investors accounting for more than 75 percent of financial assets in our country. These substantial assets and the potential cognitive effects of the normal aging process make senior investors vulnerable to financial exploitation. FINRA and the SEC have made protection of senior investors a priority and are expecting financial professionals to strengthen their roles as the first line of defense for this vulnerable group.
As part of that effort, the FINRA National Senior Investor Initiative Report highlighted recent industry trends that impact senior investors. In a series of examinations, FINRA focused on a broad range of topics, including the types of securities being sold to senior investors, training of firm representatives, and how firms address issues relating to aging (e.g., diminished capacity and elder financial exploitation). In this report, FINRA provided some recommendations for better practices:
- Requiring a series of mandatory continuing education courses that will address the stages of mental capacity and solutions to handling an investor’s potential diminished mental capacity, such as involving a family member or third party to attend meetings and document all interactions;
- Using written supervisory procedures that require approval to participate in unscripted seminars that are not subject to the principle pre-use approval requirements;
- Distributing evaluation forms to seminar attendees to solicit feedback in order to identify any issues of concern that may violate firm policies;
- Using more detailed customer account information to determine both short and intermediate term expenses;
- Requiring representatives to memorialize in firm computer systems conversations between the planner and senior investor relating to recommendations;
- Establishing strict firm product concentration guidelines for senior investors;
- Requiring a customer signature on a disclosure form indicating that the customer received a prospectus;
- Providing a detailed description of registered representative compensation for each product sold on their website.
In the last year, FINRA also rolled out a new Senior Helpline (844-57-HELPS (844-574-3577)) on its web page. Senior investors are encouraged to use this hotline to seek help or register complaints, and FINRA may use its regulatory authority to follow up and obtain restitution for senior investors.
With the deafening sound of happy new retirees popping champagne corks every day, the best financial planners will have a plan in place for providing excellent service to our senior investors.
FPA - Connect
