Working to keep seniors secure
No pension. No retirement plan.
But he had accumulated savings of more than $163,000 as a hard-working farmer.
So when Tammy Johnson, an insurance investment agent from Green County, came knocking on his door, the 84-year-old was relieved he’d no longer have to worry about having enough money to live on.
After all, Johnson promised him a greater return on his investment than the rates he was earning on his bank accounts, according to an investigation report by the Wisconsin Office of the Commissioner of Insurance.
Over the next three years, Johnson visited the man several times and sold him insurance policies and annuity products that he didn’t understand, according to a police report.
Through many transactions, Johnson put much of the man’s life savings into investments that were not appropriate for him but that yielded tens of thousands of dollars in commissions for her, according to records.
Police got involved after the man’s nephew and a neighbor learned the man had stopped receiving a dividend check from the life insurance annuity Johnson sold him.
A Janesville police detective was assigned and turned over the case to an investigator with the state Office of the Commissioner of Insurance.
The insurance commission’s case against Johnson still is pending and under investigation. She was scheduled for a hearing in May, but it was rescheduled to Oct. 1 at her request, according to a commission spokesman.
If found in violation of state statutes, Johnson could lose her license to sell insurance, be ordered to pay fines and be told to make restitution, according to the state investigator.
Older adults targeted
Older adults are the fastest-growing segment of U.S. investors, and a growing number of seniors are being targeted by abusive sales practices that might result in fraud, according to a consumer alert from the Wisconsin Office of the Commissioner of Insurance.
Older adults will have more than $8.5 trillion to invest over the next 40 years, according to the North American Securities Administrators Association Web site.
They also make up about 30 percent of today’s financial fraud victims, according to Consumer Action, a consumer advocacy group.
That’s why local officials who work with seniors and state and federal regulators are becoming more concerned about the growing number of unscrupulous marketing and sales practices by financial services firms.
They want consumers to be informed about free seminars and people who proclaim to be experts in retirement planning or advising seniors.
Randall Hoth, president and chief executive officer of the Better Business Bureau of Wisconsin, Milwaukee, said that the pace is picking up for “free lunch” presentations in Wisconsin, and he believes it is related to the poor economy.
There’s no magic financial solution, Hoth said.
Companies might offer complex financial transactions involving home equity and promising 18 percent returns each year for the next seven years, Hoth said.
“It’s too good to be true and cannot sustain itself over time. That should raise the red flag,” he said.
But people sometimes ignore the flags.
“People (mostly seniors) are really concerned about the cost of living and their (financial) security and reach beyond legitimate financial returns in the marketplace,” Hoth said.
If you get an invitation to a free seminar, he stressed, “Do you homework. Check out the credentials of the person presenting independently from what is being told to you by the company or sales representatives who could be telling you anything to make it sound good.’’
Beware of titles
Most seniors aren’t investment wizards. That’s why they seek help at seminars and from financial experts. And although there are many legitimate financial planners out there, some give themselves important-sounding titles to convince others of their expertise, said Patty Struck, administrator of the state Department of Financial Institutions, Division of Securities.
“If you’re thinking of hiring somebody because of designation, make sure you ask a lot about what that means,’’ she said.
Ask how the retirement planners, senior advisors or senior consultants are certified or accredited. Ask how they got their designation, how long they’ve had it, if they take continuing education to hold onto their designation and whether they will lose their designation if too many complaints are filed against them, Struck said.
“If you can lose it,” she said, “it means you studied more than marketing.’’
Struck and others who work in similar jobs in other states have testified to Congress about the necessity of senior specialist designations.
“We felt it was appropriate to do some rule making in this area because of the possibility that people in our states were being defrauded by people who were representing themselves as experts but weren’t,’’ she said.
Eight states, including Wisconsin, have adopted or are in the process of adopting regulations to separate experts from the nonexperts, Struck said.
The regulations will go into effect in Wisconsin in the next couple months, she said.
It’s important to validate the amount of training someone has, Hoth said.
“There’s a national designation for ‘certified’ that takes a lot of coursework to accomplish,” he said.
Rock County senior benefit specialists Terri Pass and Josh Hinz are required to attend monthly training with the Coalition of Wisconsin Aging Groups attorneys to keep current on issues that pertain to seniors, said Rob Wilkinson, chapter specialist for AARP and presenter of the organization’s Fraud Fighter Program.
Wilkinson said most upstanding businesses or individuals want you to do your research so when you’re investing with them, they can give you the best service possible.
Why target seniors?
“It’s where the money is,” Struck said.
And investment and financial services have learned they’re having success in selling products to seniors, Hoth said.
“Seniors, living on a fixed income, are stretching to believe something that is not true. They’re stretching for higher yields as everything costs more and people that have already retired or are nearing retirement are keeping an eye out for the best possible returns to supplement their income,’’ he said.
Wilkinson said seniors often are too trusting.
“They maybe don’t trust their own ability to make decisions so are trusting others to make decisions for them.’’
It’s also sometimes easier for seniors to simply avoid doing the research and to assume everything is going to be fine, Wilkinson said.
“Unfortunately, that’s not true,’’ he said.
Recognize a scam
Wilkinson presents AARP’s Fraud Fighter Program, a consumer education program to teach seniors to recognize consumer scams and report fraudulent activity.
“A lot of complaints go unfiled because of embarrassment and not wanting family and friends to know they have been taken by an unscrupulous investment adviser,” Hoth said.
“They’re also afraid of being ridiculed or people thinking less of them,” Wilkinson said.
But Hoth can’t stress enough the importance of reporting fraud.
“If you have a concern about federal or state agencies, contact the Better Business Bureau. We’re private, nonprofit, your name won’t come out in public, but your complaint will and that’s important so we have information to help protect future investors.”
Financial fraud can be devastating.
“They’ll lose everything they’ve saved,’’ Wilkinson said.
And when that happens, it affects people adversely and drastically.
“Sometimes it’s depression but there can be cases of suicide because people can’t cope with the losses.’’
Still at it
Tammy Johnson’s case still is pending with the insurance commission, but she apparently continues to give investment advice.
A Janesville police detective recently learned Johnson in July gave a free dinner and asset preservation workshop in southwestern Wisconsin.
A brochure indicated participants would learn how to “lock in higher fixed rates,” “guarantee an income you can’t outlive,” with “limited seating” and “no sales pressure.”
To get help
Local police are your first line of defense against fraud. AARP and the state Office of the Commission of Insurance also suggest the following resources:
-- AARP Wisconsin at 1-866-448-3611. AARP can recommend which agency will be best suited for you.
-- Consumer Groups: Wisconsin Office of Privacy Protection, 1-800- 422-7128; Wisconsin Consumer Protection Hotline, 1-800-422-7128; Do Not Call Hotline (Wisconsin), 1-866-966-2255; Do Not Call Hotline (National), 1-888-382-1222; Stop Direct Mail Service, 1-888-567-8688; Mortgage and Foreclosure Helpine, 1-866-722-9248.
-- Credit: Free annual credit report requests, 1-877-322-8228; Equifax, 1-800-525-6285; Experian, 1-888-397-3742; TransUnion, 1-800-680-7289.
-- Attorney Services: Elder Law Center of Wisconsin, 1-800-366-2990; Wisconsin Bar Association lawyer referral service, (608) 257-4666; Professional Licensing Agency, (608) 266-2112; Wisconsin Attorney General, (608) 266-1852; Wisconsin Secretary of State, (608) 266-8888; U.S. Securities & Exchange Commission, (202) 942-8088.
-- Wisconsin Office of the Commissioner of Insurance: Call before you disclose any personal or financial information, 1-800-236-8517; www.oci.gov.
-- Department of Financial Institutions Division of Securities: Call to verify that the person is licensed to sell insurance products or securities products, and that there have been no complaints or enforcement actions against the person, 1-877-746-4334, www.dfi.wa.gov.
-- Wisconsin Better Business Bureau: Call to learn about any complaints, 1-800- 273-1002, wisconsin.bbb.org.
-- North American Securities Administrators Association, (202) 737-0900, www.nasaa.org.
-- Financial Industry Regulatory Authority, (301) 590-6500, www.finra.org.
-- Wisconsin Department of Agriculture, Trade and Consumer Protection, (800) 422-7128, www.datcp.state.wi.us.
-- Coalition of Wisconsin Aging Groups, (608) 224-0606; www.cwag.org.
Tips for avoiding fraud
The Wisconsin Office of the Commissioner of Insurance recommends that you:
-- Question credentials of “experts.” People often boast designations and credentials using terms such as “certified,” “accredited,” “retirement planner,” “senior advisor” or “senior consultant” to convince people they have special expertise to help seniors choose investment strategies. This may not be true. Ask about the person’s qualifications and training, and check them out for yourself.
-- Beware of the “free lunch” seminar. There is often a catch to a free seminar, even those advertised as unbiased and educational. While certain information provided at seminars may be useful, a seminar may end up being a sales presentation for life insurance, annuities, other insurance products or investments.
-- Question if a product being recommended make sense for you. Always be sure you understand what is being sold. Do not hesitate to ask questions.
-- Never make a final decision at a seminar. If you attend a seminar, you may be exposed to high-pressure tactics, frightening stories about people who don’t have enough money to live on in retirement and promises of amazing financial returns. Consider obtaining a second opinion from an accountant or other professionals who will not benefit financially from the sale.
-- Report scams. If you feel you may have been pressured into buying a product that is not right for you or if you feel that you may have been misled during a sales presentation, do not hesitate to contact regulators for assistance.