Ask questions — and get the facts before you buy
By Cathy Green
So you’re retired, or soon will be, and you’re taking a hard look at your financial situation.
Or maybe you’re not.
Early last year, in cooperation with the Financial Planning Association, the Wall Street Journal printed a special advertising section, “A Guide to Financial Planning.” It reported on a study of 2,000 individuals between 40 and 75, which found that only 40 percent were “on track” in planning for retirement.
But, you say, you would like to put some of your savings to work. What do you do? The number and variety of possibilities can confuse anyone.
The U.S. Securities and Exchange Commission (SEC) has some sound advice in a section on fraud: “Investing always involves some degree of risk. You can minimize your risk of investing unwisely by asking questions and getting the facts about any investment before you buy.”
For starters, ask yourself if you can afford to lose the amount you invest. And do you have enough cash reserves in a safe place, like a federally insured savings account, that can be reached easily in an emergency?
How to choose an expert
You may want to turn to an expert for help — a stockbroker or financial planner, but how do you choose one? Whether you turn to the phone book or to friends’ recommendations, the Pennsylvania Securities Commission (PSC) advises being prepared for the interview. Know your goals and be realistic about achieving them. Don’t risk any savings you can’t afford to lose.
Then, ask questions — plenty of questions. “No question is dumb or silly when it comes to understanding how your hard-earned cash should be invested,” says the PSC’s Investor Education website.
Scams target baby boomers
“One of the first steps before investing is to find out whether the person selling the investment is licensed with the PSC,” said Tina Kotsalos, investor education coordinator for the PSC.
She said consumers can get this information by calling the toll-free number, 1-800-600-0007, and requesting a research report on the background of the broker/dealer or investment advisor. The report indicates whether that person is licensed to sell securities in Pennsylvania, and also includes background information on education and disciplinary history.
The rising tide of baby boomers has attracted some unscrupulous “advisers” with questionable credentials. After all, the con men (or women) figure, this is a group that probably has healthy financial resources, paid-up mortgages and probably some concern about the financial future.
The potential for victimizing older investors is great enough that the SEC has been working with individual states’ regulators to draw up preventive measures.
Why is this group vulnerable? Concern about the future of Social Security, the rising cost of healthcare and other expenses have people studying ways to beef up their assets.
Free lunch (& sales pitch)
There really is such a thing as a free lunch — if you can resist a sales pitch. You may be invited to a nice restaurant to hear a speaker discuss financial matters. Enjoy the lunch, but don’t be in a hurry to sign up for the attractive investment offer that follows the lecture. The North American Securities Administrators Association, in a report on such “seminars,” found that almost all were actually sales presentations and half of them featured exaggerated or misleading claims.
There isn’t always safety in numbers, either. The SEC warns of “affinity fraud,” in which a group is contacted, often through a trusted member of the community, about some “can’t-miss” money-making scheme. Favorite targets are religious or ethnic groups. The SEC advises the same precautions as it recommends to individuals.
There are plenty of pitfalls for unwary investors, but there is also plenty of help.
“The PSC offers quality noncommercial investor information on a wide variety of subjects. Materials are free of charge and can be easily downloaded by going to www.psc.state.pa.us or by calling the toll-free number,” said Kotsalos. It’s 1-800-600-0007.
Websites to check
Websites with links to senior financial planning information:
• U.S. Securities and Exchange Commission: http://www.sec.gov/investor.shtml
• Pennsylvania Securities Commission: http://psc.state.pa.us
• North American Securities Administrators Association: http://www.nasaa.org
• AARP:
http://www.aarp.org/money/financial_planning/
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