Senior Investors and Those Saving for Retirement

Senior Investors and Those Saving for Retirement


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Full video transcript available below:

Hello and thank you for joining today's webinar Best Practices to Master an SEC Exam. Our presenters today join us from Northpoint Compliance, Victoria Hogan and Colleen Montemarano.

Next we have senior investors. Thank you. So, once again, this is another repeat from 2017, and senior investors focuses on how firms manage their interactions with senior investors toward 65 plus. Here, I think, one of the key components is to have good internal controls. It's always important to document client meetings and phone calls, and then, with senior investors, you want to be sure to document their financial needs to show that the investment recommendations are suitable.


You also want to have documentation in case they don't look at a conversation in the future. Often as investors age, you'll find their children or other family members become more involved in their finances. And I see a lot of advisers struggle with this because it can be tricky. You need to be sure to protect your client's privacy, so you want to make sure you don't discuss client account to family members, unless you have documented permission or they have a power of attorney.


On the other hand, however, there also may come a time where a client can't handle their own account. And so here's it's a good idea to discuss power of attorney and estate planning while clients are still in good health, 'cause once they're incapacitated or starting to show signs of dementia it can be too late to get these things in order. And something that I've seen in my clients too, and I think it's a good practice, is to encourage your older clients to bring children with them to meetings, and this can help facilitate these discussions about planning for the future.


You also want to make sure that you're established policies and procedures regarding the suitability of investment recommendations for all your clients, and while I haven't seen forms with specific policies regarding the suitability of products and services directed at seniors, there has been recent focus on the unique risk associated with senior investors. This has been a topic in the broker-dealer area for quite a while, and we are seeing an increased focus on this area in the investment adviser space. Though when conducting reviews of suitability for senior investors, you want to look for signs that they are being taken advantage of such as a higher risk investment, which may not be appropriate for a senior investor but ADV the portfolio manager has an incentive to recommend because there's a higher fee, but you also want to look for frequent trading, especially if the manager is earning commissions.


Another concern with seniors can be financial exploitation by someone outside of the investment adviser, and here the NASAA has a senior investor resource center and an initiative that's called Serve Our Seniors. The website for this is, and I'm hearing you can find a lot of resources for both investment advisers and clients. If you have a lot of senior clients, this can be a good resource.


A new of the recommendations I found here was to establish policies for reporting potential financial exploitation of seniors, including what signs to look for and who to report these too. It's not something that I've seen my clients do at this point, but I do think that I could be prudent if you have a large number of senior clients.


One thing I have seen some of my advisers doing already is provide employees the training regarding how to stop financial exploitation, for example, if you suddenly receive an unexpected request to send a large sum of money to a family member, or a new friend that could just may be a sign, or if you have signs of diminished capacity, such as someone repeatedly asking you the same questions. You want to make sure that employees know to look for this, and also, who to report it at the firm.


And then along similar lines, up next we have those savings for retirement. This is similar to the retire initiative, which we saw last year. The SEC is continuing to focus on investment advisers with retail clients and clients saving for retirement. Once again, they'll be looking at the recommendation of variable insurance products and target date funds. They're also focusing this year on investment advisers to manage retirement vehicles, which serve state and local government employees and non-profit employees the 403bs and 457 plans. You want to make sure that you are documenting client's risk tolerance and investment goals to be able to show that investment recommendations are suitable, and one of the tests you can do is the compliance department should periodically conduct reviews of suitability, and you want to make sure that you maintain documentation of this review so you can just pull a sample of clients that fit the profile of those savings for retirement and take a look at the documentation of their risk tolerance and compare it to the investment, which has been recommended.


Another focus area here is the sale of variable insurance products. Once again, if you're recommending these products, of course you want to ensure that you've documentation of suitability. And if your portfolio managers receive commissions on these types of products or if they have an incentive be sure to recommend them over other investment, so you also want to make sure that you're monitoring towards switching between products. Switching between variable insurance products can result in client seeing high surrender fees, and if you have portfolio managers to receive commissions it can also generate additional commissions for them.


You also want to be sure that you disclose the clients prior to investment all of the fees associated with variable insurance products, including the surrender fees, if they're applicable, and then any conflicts of interest in recommending those products, such as if the portfolio manager receives commissions. And then, up next is the sale and management of target date funds. With respect to recommending target date funds, you want to make sure the client is receiving ongoing investment advisory services. Since the target date funds is an investment vehicle professionally managed with an asset allocation strategy that is taking into consideration risk tolerance over time, then, here one might question what is the adviser doing to earn their management fee.


You want to be sure that the accounts with these types of investments have documentation of the ongoing services that the portfolio manager is providing, such as notes to client meetings where investment objectives are discussed or financial plans, and also, ongoing review of the target date fund to ensure that they remain a suitable investment.

This webinar was co-hosted with Victoria Hogan and Colleen Montemarano of

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