According to a recent study, six in 10 workers say they and/or their spouse have less than $25,000 in total savings and investments (excluding their home and defined benefit plans), and 36 percent say they have less than $1,000. No wonder consumers on the brink of retirement are anxious to play catch up so they don’t have to rely solely on Social Security. This explains why they’re interested in retirement-education seminars and why financial-services firms use them for lead generation.
But there are two challenges here. First, consumers want legitimate information, not warmed over sales pitches. And financial advisors want high percentages of prospects to attend and ultimately request an office interview. Unfortunately, these two conflicting objectives can lead advisors to mount ethically dubious— and legally noncompliant—seminars.
One danger is masking a seminar as a non-profit educational initiative conducted by university “instructors,” not financial advisors. This lack of disclosure and misrepresentation can potentially lead advisors to run afoul of the anti-fraud provisions of the Securities Act of 1935 and the Investment Advisors Act of 1940. Not a good idea!
Here’s a real-life case in point. A few months ago, a National Ethics Association staffer received an advertising brochure in his Sunday newspaper touting a retirement-education workshop from the “Golden Retirement Institute” (not its real name). The brochure claimed that recent changes in the economy had rendered most retirement-planning concepts irrelevant. Consumers who wanting a secure retirement, the brochure claimed, should tap into current thinking and research. How? By attending the Institute’s three-part retirement-education workshop.
Now, the program’s brochure and web content made much of the Institute’s non-profit status and charitable contributions to local groups, of its national instructor network delivering education at schools and colleges, and of its extensive reliance on third-party academic research in preparing the seminar content.
So convincing was this pitch that our staffer decided to attend. Only after registering and paying a nominal fee did he learn the sponsor was actually an insurance FMO and that its non-profit instructors were financial advisors looking to generate leads. Despite confirming the group’s non-profit registration, he could find no evidence of the touted charitable activities and no disclosures regarding the identities and qualifications of program instructors.
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