Protect Your Pre-Retirees: Let Them in on Potential Red Flags for Retirement Advice
October 12, 2010The party is planned, the last day of work is circled on the calendar, and everyone’s happy and excited for Dave’s big day, including the financial advisor Dave met last week at a retirement planning dinner event he recently attended. It seemed like a coincidence: just when he started spreading the word of his upcoming retirement, an invitation came in the mail for a free steak dinner retirement seminar at his favorite steakhouse in town. Dave left the seminar with the message that he needed to cash in his 401(k) as soon as he retired so he could roll it to an IRA and get better investment options, higher returns, better estate planning options, and best of all, someone looking out for him to manage his money.
What he wasn’t aware of is that the IRA being pitched to him had higher fees and expenses – sometimes as much as 2 to 3 times the expense ratio compared to his 401(k) funds. Even worse, the annuity product being pitched at the dinner would handcuff Dave’s nest egg with a 10 year surrender charge if he tried to take the money back out.
Lucky for Dave the financial advisor’s name wasn’t Bernie, but how do we really know an advisor is looking out for the best interest of your pre-retirees? A 2009 CFP Board survey found that the most likely candidates of financial fraud were senior citizens between ages 61 and 75. Even more startling was that 60% of respondents knew a consumer who had experienced fraud or abuse from an advisor.
So where can we turn to guidance and be able to recognize the red flags of potential trouble? Make it a part of the exit interview to hand out The Consumer Guide to Self-Defense so your employees that are entering retirement can protect their nest eggs they worked hard to build.