Protecting Seniors Against Investor Fraud

Published on August 26, 2021

August 14 was National Financial Awareness Day and August 21 was National Senior Citizen Day, which was proclaimed in 1988 by President Ronald Reagan to recognize the achievements and services of our country’s more mature citizens throughout their lives. According to the U.S. census, more than 54 million seniors were living in the U.S. in 2019; that number is projected to grow to 95 million by 2060.

Seniors lose more than $3 billion annually to fraud; this heartbreaking statistic includes the retirement savings of millions of people a year. These are all good reasons to raise awareness of potential fraud among older adults especially, and among all investors in general.

The top financial fraud scams that target seniors are listed here, including those that use fake tech support, Medicare, and scared grandchildren ruses via phone, email, or text.

Beware investor fraud at any age

You know the saying, “It’s too good to be true?” That’s one way to recognize a potentially fraudulent investment opportunity. You can also visit Investor.gov (a website of the SEC), which has a wealth of information about how to avoid retirement fraud.

Individuals who invest in alternative assets through a self-directed IRA should be accustomed to doing their research and conducting full due diligence about their investments, and typically have experience with alternative investments. While they may already know these tips, some chief ways to avoid possible investor fraud are:

• Never be rushed into an investment decision
• Research the company before you invest – something we strongly recommend all self-directed investors do, every time they invest in an alternative asset
• Watch out for unsolicited offers
• Know who you are dealing with – you should know and trust your self-directed IRA custodian; never be afraid to ask questions and get referrals to firms that put a high price on integrity
• Always know where your funds are

Fraud risk and self-directed IRAs

Baby boomers and Gen Xers who are approaching retirement age, or seniors who’ve continued working into their retirement years, cannot afford to become victims of senior fraud. Because of the broad array of alternative assets allowed through self-direction, and because self-directed investors make all their own investment decisions, it is increasingly important for senior investors to educate themselves on the risks.

As with any financial account you open, research the plan custodian that will hold the assets. How transparent is their transaction process? Are the forms for opening and funding a plan easy to follow? Is the team available by phone or email to answer your questions about self-directed investments?

The SEC and Next Generation Trust Company offer these tips for avoiding retirement fraud in self-directed IRAs:

• Verify information in self-directed IRA account statements, such as prices and asset values
• Avoid unsolicited investment offers. Fraudsters may attempt to lure investors into transferring money from traditional IRAs and other retirement accounts into new self-directed IRAs.
• Research the investment thoroughly.  Depending on the asset, get as much information as you can about the type of investment (royalties, real estate, precious metals, private equity funding, etc.)
• Be wary of “guaranteed” returns.  Fraudsters often try to convince investors that extremely high returns are low risk by calling them “guaranteed” or “can’t miss” opportunities.  Be extremely wary of such claims.
• Understand the roles and responsibilities of the self-directed IRA custodian. The custodian should provide a custodial agreement and explain that the firm does not endorse nor sell any investments.
• Consult a professional. Having a trusted advisor, like a financial advisor, tax advisor or attorney, to consult about certain alternative assets is always a good idea.

If you fear that you or a loved one has been the victim of investor or senior fraud, contact the SEC Complaint Center.

To learn more about self-direction as a retirement wealth-building strategy, you can always get the information you need from Next Generation, where our team is here to answer your questions.  We can be reached via phone at 888.857.8058 or email at NewAccounts@NextGenerationTrust.com. Alternatively, you can schedule a complimentary education session for a 1-on-1 with one of our IRA specialists at your convenience.