Retirees, Watch Out for Scammers

Posted on: August 8th, 2010 by

Financial Advisor - Rockville, MDAnnuities, reverse mortgages, life insurance pools, principal-protected notes… the options being offered to senior citizens hoping to ensure a comfortable retirement are innumerable. And in a growing number of cases, that may be the intention as more scammers, often the elderly themselves, try to con retirees. Though hard numbers are difficult to come by, many lawyers and advocates for the elderly say more seniors than ever are being lured into investment schemes that are unsuitable for people of their age or are outright swindles.

One out of five Americans over the age of 65 has been the victim of a financial scam. That means more than 7.3 million seniors have been taken advantage of financially through inappropriate investments, high fees, or fraud. Many of today’s scam artists have a particularly good understanding of their victims, this being because the fraudsters themselves are of retirement age, if not exactly retired. More elderly con artists than ever seem to be preying on retirees, perhaps because senior citizens put more confidence in someone their age.

In November, William Kirshner, 84, a financial adviser in Corpus Christi, Tex., was sentenced to five years in prison for stealing more than $100,000 from senior citizens and other clients who invested in promissory notes issued by his company. Ronald Keith Owens, 74, was sentenced to 60 years in prison in January 2009 for persuading investors, including retirees, to put more than $2.6 million into nonexistent bank-related investments. And William Walter Spencer, 68, a Franklin (Tenn.) financial adviser, sold elderly members of his church promissory notes that turned out to be bogus.

Veterans are one of the biggest targets. Several groups offer to help former soldiers sign up for a $2,000-a-month benefit from the Veterans Affairs Dept. in Washington. While the program is real, some groups are telling seniors they can only qualify if they liquidate their assets and purchase an annuity, which usually comes with a hefty sales commission.

Reverse mortgages, which let people aged 62 and older get cash out of their homes and are repaid when the borrower dies or moves, are a big part of many scams. One popular ruse is urging the elderly to finance annuity purchases with a reverse mortgage, despite a ban on cross-selling them with other financial products. Other unsuitable investments being pushed on seniors are pools of life insurance policies, similar to the bundles of home mortgages that helped fuel the financial crisis. Some of these have turned out to include policies that don’t exist, and it’s unclear whether they’re supposed to be overseen by state insurance regulators or the Securities & Exchange Commission.

Principal-protected notes are another investment being pushed on the elderly. Seniors tend to fall for these because the name makes it sound as if they’re risk-free; in fact the principal isn’t always protected, as holders of notes backed by Lehman Brothers learned when the firm collapsed.

The new financial regulatory reform bill would crack down on advisers who market themselves as specialists in investments for seniors, and another measure would include harsher penalties for anyone committing securities fraud against the elderly. “We need better regulation of this industry,” says 75-year-old Senator Herb Kohl (D-Wis.), who heads the Senate’s Special Committee on Aging, “so seniors can tell the difference between professionals who offer clear and unbiased financial advice and bad actors… who steer them toward inappropriate financial products.”



  1. Tag Cloud
  2. Blog Home