Seniors and their loved ones have enough to worry about without the stress of financial management. Finding a qualified financial advisor for a senior can be difficult, especially with financial law and activity being hard to understand for the average person. People 60 and older makeup 15% of the population, but are 30% of the victims of investment fraud, according to the Consumer Financial Protection Bureau. It is vital that every resource is used to protect seniors from becoming victims of nefarious financial advisors. Here are five steps that can be taken in order to identify trustworthy and effective financial advisors who will serve seniors well.
Find Free, Reliable Advice
Many resources have free advice available for all people, including seniors. Focus on trustworthy organizations. Many companies want to sell you on their services, but going to the FDIC, AARP, or Forbes will present unbiased resources that are prepared to answer your questions and provide solid research.
Visit your bank. Seniors are often loyal members of banks and credit unions, and finding people to trust is as simple as visiting a bank’s branch and inquiring as to what resources they have available.
Use Mint.com. (There is also a free app for smartphones and tablets!) This site or app keeps track of your financial data and can be updated every day, multiple times a day. Being aware of your financial picture at all times increases your ability to hold financial advisors accountable.
You are not obligated to stick with the first or most convincing financial advisor you find. Taking time, weighing options, and comparing rates will benefit you in the long run.
Come to any financial meeting with a plan and specific questions. If you are looking for specific ways to manage and invest wealth, ask what that financial advisor can do for you in those ways.
Ask around among other seniors. Word of mouth is one of the most effective ways to spread good and bad customer reviews, so utilize the community around you to determine who has yielded strong results and who hasn’t.
Trust Your Instincts
The basic foundation of any financial investing relationship is trust. If you feel that you can build trust with an advisor, invest some but not all of your assets with them. If, over time, this relationship is strong and the investment goes well (but not too well—see Step 5), consider investing more financial resources with this advisor.
Financial advising is a business, so there is an element of self-interest on the part of the financial advisor. Make the relationship work with this understanding in mind: how can both you and the financial advisor make money? Is what you receive going to also benefit the financial advisor? Do they truly stand to benefit if your money does well? Do they seem more interested in taking every penny of yours or in making solid investment choices? The answers to these questions should be apparent before you make a decision.
Watch for Red Flags
Forbes published an article outlining several ways that financial advisers can mislead seniors into believing they have some kind of specific expertise in managing seniors’ money. Check each abbreviation that comes after a financial adviser’s name—CSA, CSFP, etc.—in order to see if that truly qualifies them to manage your money. Use the Internet and the Financial Regulatory Authority (which independently regulates U.S. securities firms) to get more information on the designations your financial adviser holds, and if those are monitored closely, require extensive training and experience, etc.
Avoid anyone offering big money fast, with no risk. Investing is always a risk, and smart investing earns money incrementally, not suddenly. These are things that investors learn in their first few weeks, and their clients should know it as well. It is likely that anyone promising big returns and no risk is promising to steal your money.
Ponzi scheme purveyors use trust people already have among their fellow church, synagogue, or other altruistic organization members. They will make friends with one member, promise big returns (and actually deliver them for a while) until a whole group is hoodwinked into investing. When the “pot” of money grows big enough, the Ponzi schemer disappears, leaving the original friend and others to hold the bag financially, unable to make pay-outs, and sometimes to deal with legal consequences.
The maxim: “If sounds too good to be true, it probably is” is an important rule of thumb when investing.
Check the Credentials
The Financial Planning Association, National Association of Personal Financial Advisors, and the Securities Exchange Commission have details about Certified Financial Planners and other financial organizations. They have information available online and via telephone. Look for things like complaints, lawsuits, criminal violations, general customer reviews, etc.
The Better Business Bureau in your area will also have information on local financial advisors. Other places to check include: state organizations which provide credentials or hold records for financial advisors and the CFP national board.
Read More: Financial Abuse of the Elderly
AgingCare.com, “How to Find a Good Financial Advisor.” https://www.agingcare.com/Articles/financial-advisor-qualifications-to-look-for-117125.htm.
Mayer, Caroline. (April 25, 2013). “Watch Out for ‘Senior Specialist’ Financial Advisors.” Forbes. Available at http://www.forbes.com/sites/nextavenue/2013/04/25/watch-out-for-senior-specialist-financial-advisers/. Retrieved 01/06/2016.
AARP.org. “Can You Really Trust a Financial Advisor?” http://www.aarp.org/money/investing/info-08-2013/can-you-trust-a-financial-adviser.html.
Consumer Financial Protection Bureau. “Senior Designations for Financial Advisors.” Available at
http://files.consumerfinance.gov/f/201304_CFPB_OlderAmericans_Report.pdf. Retrieved 01/07/2016.