This month’s Compliance Corner blog will discuss some high-level points surrounding advanced-aged customers that you should be aware of. Industry regulators have focused on this topic quite a bit over the past several years and given the aging population, that focus will become more robust in the future.
We’ve all heard the reports and may have seen the studies that show our population in the US aging at a rapid rate. The Baby Boomer generation represents a large percentage of our population and they now fall between the ages of 53 and 71. These individuals are near or at retirement and many are looking for assistance with their retirement assets. Once an individual reaches an advanced age (typically ages 65 or 70, depending on the regulatory agency) and is sold an annuity, there are certain things you need to keep in mind.
Many sales practice issues that involve seniors are raised via customer complaints. Most of the grievances I’ve seen over the years concerning seniors tend to involve a few common issues:
- The customer didn’t know what they purchased and/or didn’t understand how the product worked;
- The vast majority of the customer’s assets were placed in the annuity product sold;
- The customer was asked to replace other products and may have either been assessed surrender charges and/or lost benefits and features they had in the previous contract(s).
As with any annuity contract you recommend to a customer, you should have clear documentation supporting your recommendation and the product you selected. Having good records covering your due diligence process may provide you with your greatest defense if a customer complaint is ever submitted or if a regulator requests your documentation. These documents should clearly illustrate the needs and the intended use of the product you have presented to the customer. This documentation should also memorialize the customer’s financial picture.
Keep in mind, customers who are retired may now live on a limited, fixed income and may not be able to afford an annuity—meaning they may have limited liquidity or have greater needs for access to money. Additionally, you should keep good notes detailing your conversations with your advanced-aged customers. It may be a good idea to encourage these customers to bring a family member with them to your meetings, as many customer complaints involving seniors are raised by their heirs.
Be sure your advanced-aged customer understands what they are buying—educate them. Ask them questions to determine their level of understanding and never take their level of knowledge for granted. If a customer doesn’t fully comprehend what they are purchasing, it raises a multitude of risks that could negatively impact your customer and the risks to you may also be high from a legal and regulatory perspective.
As always, should you have any compliance questions, we are always here to help. Please feel free to send an email to firstname.lastname@example.org.