How your firm can stay compliant when serving seniors

Finra to look at how firms sell annuities, REITs and other products to older clients

Jan 3, 2014 @ 1:09 pm

By Liz Skinner

Financial industry regulators are making it clear they don't want advisers to treat senior citizens just like any other client.

The Financial Industry Regulatory Authority Inc. said last week it will continue its look in 2014, along with the Securities and Exchange Commission, at how financial firms sell annuities, real estate investment trusts and other products and services to older clients.

The two regulators began an examination of firm engagement with senior clients last year to see if firms have specific policies and procedures to protect the elderly in place, and if they have enough controls to identify potential financial abuse of seniors or those with diminished mental capacity.

So far, that review has found that some firms have rules for seniors who buy specific products, while others focus on age — asking clients about their retirement status, employment options and health care needs — Finra explained Thursday in its regulatory and exam priorities letter.

The self-regulator said it may issue a report with observations of firm practices at the completion of the review — and reminded advisers that it will pursue enforcement options when it suspects financial abuse.

Adviser consultant Robert Sofia said he doesn't recommend a firm create a separate policy for seniors. Instead, he tells advisers to dictate notes after each client meeting, use an agenda to make sure all important questions are asked, and make all new clients complete a detailed risk-tolerance questionnaire.

“Advisers who abide by a fiduciary standard and document everything well should have few, if any, problems,” Mr. Sofia said.

While investment suitability rules don't change according to age, Finra and other financial regulators have stressed their concern with and attention to the appropriateness of investment recommendations to senior investors.

Meanwhile, state regulators plan to continue their longstanding efforts to raise awareness of senior investment fraud.

The North American Securities Administrators Association plans to launch a new initiative this year, said NASAA spokesman Bob Webster. He declined to offer details of the effort.

The Consumer Financial Protection Bureau also is targeting financial abuse of the elderly through its Office of Older Americans. In April, it released a report and recommended better online tools to compare adviser credentials, increased disclosure from those who use senior designations and requirements for minimum testing for senior credentials.

“We found that many consumers don't understand basic differences between brokers, investment advisers, insurance agents and financial planners — let alone the 50-plus senior designations that many of those financial advisers add to their titles,” Skip Humphrey, assistant director of the Office for Older Americans, wrote in a blog post when the report was released April 18.

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