I was reading The Providence Journal the other day, and I noticed an article on how some financial advisors aren't always serving the elderly very well. The article explained how some ambitious folks simply pay about a thousand dollars for a correspondence course, pass a not-so-difficult multiple-choice exam, and then get to refer to themselves as "certified senior advisors." With this designation, they market their services to the public, often selling them insurance products that might not be right for them, for which they're rewarded by insurance companies.

So far, so bad. Later the same day, I was scanning The New York Times online and I noticed the same article, front and center. It was clearly being deemed an important piece. I was a little astonished, because the main example in the article, an advisor reportedly being sued by Massachusetts regulators, is someone I'd actually met.

Doing some detective work
You see, last year I accompanied my parents to one of his presentations. It was billed as a financial seminar featuring a free lunch. My parents wanted to see what they might learn, and so did I. I was also interested in the free lunch.

The guy seemed nice enough, but I was dismayed by some of his information, as I kept catching errors. My parents did not sign up for any further contact with him, nor did I. But over the years, plenty of people have apparently taken this fellow's advice, and enough have had problems with it that he's being investigated and sued. For many people, these are lethal lunches, causing them massive financial headaches, at best, and perhaps even financial ruin, at worst. If any of your loved ones are headed out for a free lunch, make sure they leave the house with their eyes open.

Beware of annuities
A common financial product sold via seminars like these (I've been to a few) is the variable deferred annuity. You can read all about these beasts in our annuity nook, but permit me to make a few points about them:

  • They're often particularly bad for the elderly, as some annuities tie up all or part of your money for up to 10 years, with surrender charges if you cash out early. If you're 75 already, you might not want that.
  • The gains they deliver are taxed at regular income tax rates. That means that you could pay as much as 35% on your gains. Compare that with the current top 15% rate for people with long-term capital gains generated by stocks and mutual funds in taxable accounts.
  • They tend to sport hefty fees. If you "invest" $100,000 and pay 2% per year -- a not uncommon fee -- you'll be forking over something like $2,000 in the first year, and similar sums thereafter.
  • You have many alternatives, such as regular mutual funds and even CDs. With lower costs, you'll often earn better returns. Investing for the long term (say, at least five or 10 years) in a broad-based index fund -- or a market-tracking exchange-traded fund like SPDR Trust (AMEX:SPY) or Vanguard Total Stock Index ETF (AMEX:VTI) -- is easy. Over the long haul, the S&P 500 has averaged annual gains of about 10%.

That said, some annuities can make sense for some people in some situations. For instance, fixed annuities tend to present fewer problems than variable ones, and immediate annuities can help you hedge against the risk of outliving your money.

What to expect, what to do
So what now? Well, if you're offered a free meal in exchange for your attendance at a financial seminar, go ahead and attend, if you want. Just think thrice before buying anything. Odds are that the "seminar" will just touch on a wide variety of topics as the presenter tries to curry your favor and trust. He wants you to think of him as an advisor you can go to. He will also probably scare you by pointing out some things to worry about -- that you might lose your home by investing poorly, that the stock market can crash, that you'll soon run out of money, etc. He'll likely end by urging you to make an appointment for a free, private consultation.

If you find that you do want to consult a financial planner about your situation, there's nothing wrong with that. Just find one on your own -- don't simply go with one who offers you a chicken leg and ice cream. You might, for example, find one via the National Association of Personal Financial Advisors.

In the meantime, learn more here:

Finally, you can find out more on retirement planning right here. I encourage you to take advantage of a free 30-day trial of our Rule Your Retirement newsletter service. It's prepared by Robert Brokamp, a smart and witty guy who distills what you really need to know into a manageable volume each month. We won't buy you a free lunch, but our free trial will give you full access to all past issues, allowing you to gather valuable tips and even read how some folks have retired early and well. Robert regularly offers recommendations of promising stocks and mutual funds, too.

Longtime Fool contributor Selena Maranjian owns shares of no company mentioned in this article. She was recently relieved to learn that the rumor that a tooth left in Coca-Cola overnight will dissolve is false. For more about Selena, viewher bio and her profile. Try any one of our investing services free for 30 days. The Motley Fool isFools writing for Fools.

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