Dateline NBC just aired a show where they went undercover to investigate unscrupulous business practices in sale of retirement investments. Their target: vulnerable, trusting senior citizens with nest eggs and fear of financial insecurity.
The show revealed insurance agents attending "boot camps" where they learn How to Manipulate and Mislead Seniors 101". There, certified insurance sales agents are being taught questionable tools of the trade.
As I watched the show, I recall an episode, a few years ago where my Mom had to involve her bank to free herself from such a "scam" she had been swindled into from a former bank employee, whom she trusted.
The model for success includes securing potential clients’ trust by pretending to bond with them over a free meal. Obviously, they understand how compelling a free meal is to seniors. On the show, the agent advertised a free steak dinner and attracted a sizable crowd, a captive audience of prey. They repeatedly insist they are not there to sell, yet, their entire behavior is predatory and aggressive.
Their first step is to trigger clients' fear and ignorance of banking safety, interest, the IRS, fear of nursing home and Medicaid seizure of assets, and hefty medical expenses. They even convince them The FDIC is an unsafe and uncertain institution that will not protect their funds. Experts revealed no one has ever lost FDIC protected funds. Then, they casually offer a pot pourri of "risk free" products guaranteed to grow in value. They showed us a training manual in which the trainer tells agents to sell to seniors by assuming they're “selling to a 12-year-old" and by hitting their “fear, anger or greed buttons."
Many of these agents are selling a relatively new kind of investment: the "equity indexed annuity.” It’s a legitimate investment for some people, and sales have soared because insurance companies market them as a safe place to invest. They're called "indexed" because they're tied to the stock market such that they grow if stocks rise. They claim the best part is if stocks go down, the insurance company guarantees you won't lose.
What they don’t tell you is this instrument ties up a large chunk of the clients next egg for 10 to 15 years, not good when life expectancy is 78. Also, there are stiff penalties of 15-20% for early with drawl. Importantly, the agents hide the early withdrawal penalty feature during their sales pitch. They avoid adressing the question by changing the subject and offering additional products.
In the meantime, the agents earn attractive commissions on the sale of these products.
The show featured several hidden camera interactions between seller and senior prey (typically in their 70s) in their homes. In each case, the predators mislead potential clients. In one case, once the journalist revealed the hidden cameras, the agent cursed him for not warning him about hidden cameras.
Fortunately, many states attorney generals are investigating these cases of manipulative, deceitful practices against the elderly and there are multi-state task forces investigating the possibility of fraud in the sale of retirement investments to seniors. In many cases, the insurance carriers are forced to pay refunds plus interest. Other lawsuits are pending against such insurance companies nationwide.
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