Abusive Sales Practices in Retirement Plans

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AICPA CPE Self-Study Courses
Best Sellers – March 2008
Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots, by Sid Kess
Author/Moderator: Lance Wallach, CLU, CHFC,
Publisher: AICPA

Excerpts have been taken from this book about:

Senior abuses



The following example is unfortunately not an isolated incident of an abusive sales practice. If accountants were consulted more often by their clients, maybe the following would never happen.

Senior citizen clients thought they had every reason to trust Mr. Sell BigPolicy as a financial counselor. The insurance agent had obtained a designation recognizing him as WE DO NOT WANT TO MENTION THE NAME Senior Advisor. He obtained this designation in 2002, a credential he made sure to advertise on fliers sent to retirees.

He did not mention how easy it had been to get that title.

He had paid $1,095 for a correspondence course, then took a multiple-choice exam with questions like, “Marketing can best be described as:” (The answer: “The process or technique of promoting the sale or distribution of a product or service.”) Like more than 18,700 other applicants since 1997, he passed.

Insurance companies, eager for sales representatives, embraced Mr. Sell Bigpolicy, as they have thousands of other newly credentialed advisors.

The following year, multiple insurers paid him commissions totaling $720,000 as his business with retirees soared.

But many of those sales came from steering older Americans into unwise investments, regulators contend in a lawsuit.

Mr. Sell Bigpolicy denies all wrongdoing, but one of his clients – a 73-year-old widow caring for a son with Down syndrome – said he tricked her into buying complicated insurance contracts that left her unable to pay dental and home repair bills.

“His office was filled with things saying he was certified to help seniors,” said that client. “The only one he really helped was himself.”

Taking care of the finances of older Americans is a huge and potentially lucrative field, and the market is growing. Attracted by this market, many financial planners have shifted their focus to it – and bring widely varying attitudes and professional training to the consultation table. Training and certification in financial gerontology is now being offered by at least four groups.

The Securities and Exchange Commission does not regulate these groups – or any other groups that provide financial planning certification, for that matter. “The S.E.C. does not endorse any professional designation,” said Susan Wyderko, director of the office of investor education of the S.E.C.

The absence of government supervision is a problem, said Stephen Brobeck, executive director of the Consumer Federation of America. “There’s an opportunity for fraud,” he said, adding that older people need to be very careful about whom they trust for advice.

Regardless of any planner’s credentials, the S.E.C. and consumer organizations say the best approach is “buyers beware.”

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