The Risks of Private Stock Offerings

A couple of weeks ago, the New York Times posted an opinion piece concerning the risks that investors face, now that advertisements for private stock offerings are once again legal.  In brief, federal securities law has been changed to enable venture capitalists, hedge funds, and start-ups of any sort to raise money more easily by appealing directly to certain classes of investors.  Theoretically, this measure is in place to enable small companies to raise money with greater ease, enabling capital to flow more easily from investors to investment projects.  But as always, removing regulation enables hucksters and rip-off artists to prey upon would-be investors.  And if history has taught us anything, it’s that whenever there’s a financial scam to be run, the primary victims will usually be seniors.

The article primarily concerns itself with which government agency or political party is to blame for this state of affairs, but the point we wish to emphasize is how this new situation will affect seniors and retirees.  According to the NCPEA (National Committee for the Prevention of Elder Abuse), two of the three groups most likely to target seniors for financial scams (after family members) are “Predatory individuals seeking vulnerable seniors” and “Unscrupulous professionals and businesses”, precisely the groups who will be circling in the aftermath of these new rules.  Seniors, or at least those above the age of fifty, control over 70% of the net worth of the United States after all, and seniors are more likely to have poor financial literacy, or disabilities that prevent them from keeping close track of their finances.

NewRetirement has always held that a Certified Financial Planner can help retirees with Estate Planning, Investments, and all manner of other subjects, and that such services are valuable not only for the wealthy, but for many middle-income retirees looking to stretch their investments over time.  But what’s not often talked about is the role of a reputable Financial Planner in ensuring that scams and stock-jobbers are stopped at the door.  Scammers are sophisticated, and their scams are designed to appeal to seniors who may be concerned about the rate of return of their current investments, or who simply want to improve their quality of life over the course of their retirement.  A Financial Planner can ensure that a retirees finances are always being checked for the unexpected withdrawals, new legal documents, and inter-account transfers that are the common warning signs of elder financial abuse, eliminating the need for family members to take on this daunting task.

Fee only certified Financial Advisors who have a fiduciary relationship with their clients are not for everybody, but faced with growing threat from scammers and confidence men looking to take advantage of vulnerable seniors, their value as a security gate for anyone who wishes to protect themselves is significant.

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