Older Americans can protect their hard-earned money

Seniors can protect their investment dollars by understanding how to select a financial services provider.

Consumers are faced with increasingly complex saving and investing options. Federal and state securities laws require brokers, investment advisers, and their firms to be licensed or registered, and to make important information public. Michigan State University Extension knows that it is up to consumers to find that information and use it to protect their investment dollars. 

Finding the correct information about the titles and licenses of financial professional can be particularly challenging for older consumers. Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), said that their Office of Financial Protection for Older Americans (OFPOA) often hears from financial industry representatives, state and federal regulators, and consumer organizations that older consumers may be confused or misled by financial advisers that say they are specially qualified to work with senior populations regarding investing. OFPOA focuses on financial issues that affect seniors. It is the only federal office devoted exclusively to protecting the financial health of Americans age 62 and over.

Congress has directed OFPOA to make recommendations that will help improve the ability of older consumers to figure out the many “senior designation” titles that financial advisers use to market their services in the Senior Designations for Financial Advisors: Reducing Consumer Confusion and Risk report.

Below are a few definitions that will take some of the mystery out of the titles used in the financial industry.

Registered Investment Advisers: According to the U.S. Securities and Exchange Commission, Registered Investment Advisers, or RIAs, generally provide ongoing advice. RIAs are held to a fiduciary standard of care. Other names for RIAs include investment manager, investment counsel, asset manager, wealth manager or portfolio manager.

Brokers: Brokers are in the business of buying and selling securities for their customers and are held to a “know your customer” standard. Officially referred to as Registered Representatives, brokers are also known as: stockbroker, financial consultant and financial adviser.

Financial Planners (non-legal term): Financial Planners are generally in the business of developing and implementing comprehensive financial plans for customers based upon long-term goals, including estate, tax and insurance planning.

Insurance Agents: Agents are licensed by the states in which they do business. In general, insurance agents offer insurance-related investment products including fixed and variable annuities, whole life, term life and variable life policies. Compensation is typically commission based.

If you have decided to work with a professional - ask your provider:

  • What experience do you have, especially with people in my circumstances?
  • What are your qualifications and what is your experience?
  • What licenses do you hold? Are you registered with the Securities and Exchange Commission (SEC), Michigan’s Department of Financial and Insurance Services, or the Financial Industry Regulatory Authority (FINRA)?
  • Exactly what services do you provide?
  • Do you provide periodic portfolio performance reports?
  • How do you charge for your services?
  • Who else may be handling my account?
  • Will you provide me with a recent copy of your U-4 or form ADV Part I and Part II?

Questions to ask regarding investment recommendations:

  • Is the investment being recommended registered with the SEC and my state securities regulators?
  • What is the purpose or objective of this investment?
  • Is it consistent with my investment objective, my risk tolerance and my investment time horizon?
  • How does it fit into my overall investment strategy?
  • What costs are associated with purchasing, maintaining and selling this investment?

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