Clark Howard's Tips

September 20, 2007

The stock brokerage industry is divided into two camps: There are the brokers who work on a full commission from the investments they sell you, and those that get paid based on the financial advice they give you.

Meanwhile, consumer protection in the field is very weak. The industry has a mentality that brokers are salespeople who shouldn't have to follow any business code of ethics. It's as if the majority of the industry doesn't really care about the financial interests of its clients.

The elderly are collectively sitting on $14 trillion dollars in savings. That means they have a big, fat bull's eye on them for con artists to hit.

Christopher Cox, the head of the Securities and Exchange Commission, is a libertarian who wants the government to stay out of people's lives and is generally skeptical of interference. But he's so disturbed by the con artists ripping off old people that he's convened a conference of the feds and the state regulators to fight back.

Did you know that sales people are actually going to presentations to learn how to rip off the elderly with outright fraud and bad investments?

"Every rock that we turn over seems to have a bug or a worm crawling out underneath," Cox recently told The Washington Post. "In each of the sweeps we conducted, we found significant fraud."

Clark is very upset about all the newspaper ads he sees for notes that promise to pay up to 14 percent interest. Seniors who fall for these notes probably won't see one single penny.

Then there's the free meal seminar tactic and phony credentials that Clark has talked about so often.

The latest twist now involves marketing organizations that print up investing guide books. These books feature an author's name and a picture of whatever financial guy pays them to have his headshot on the jacket. So the end result is that the elderly are being pitched by people who look like they're respected advisors and published authors on the topic of investing. The phony tactic literally makes it seem like someone "wrote the book" on investing!

On a related note, what do you think is the most common area where seniors get ripped off because they follow bad financial advice? Annuities. No surprise there if you're a longtime listener of the show. Clark now calls annuities "the four letter word of investing."

Consumer advice courtesy of