Top 10 threats to residents’€™ financial security

They entice with promises of profits, assure with false expertise and dangle deals that are hard to resist.

But schemers who seek out hopeful investors may find themselves part of Missouri Secretary of State Robin Carnahan’s Top 10 Threats list.

Carnahan released her list on Wednesday, after her office’s Missouri Securities Division compiled the Top 10 in conjunction with the North American Securities Administrators Association (NASAA).

“The list is a combination of cases our office has received and state and national trends,” Carrie Bebermeyer, communications director. “These are all issues or cases that our office has had complaints about.”

Carnahan began issuing the annual Top 10 list when she took office in 2005.

“Fraud, scams, and inappropriate investment advice are things Missourians should not have to tolerate,” said Carnahan. “It’s important to make sure Missourians stay aware of potential threats so they’ll be better able to protect their life savings.”

More than half the complaints made to Carnahan’s office are from senior citizens who might have been victims of fraud or misleading advice, Carnahan explained.

Most investment advisors are honest, but citizens still should use caution, she added. Carnahan emphasized the importance of planning for the future with smart investing. She advises Missourians to check out investment proposals carefully before paying any money.

The Top 10 Threats on the list represent a variety of schemes or very risky plans. One involves “free lunch or dinner offers.” This plan typically targets senior citizens by inviting them to attend a seminar for investment, retirement or tax planning. The seminar includes a free meal with a promise of high returns on investments with little or no risk.

In another scheme, the perpetrators refer to themselves as “senior specialists” to give the impression that they are specially trained to help senior citizens with investments. Their goal is to provide their targets with a false sense of comfort that will encourage the victims to invest.

Older investors often should avoid complicated investments that combine features of mutual funds, variable and equity-indexed annuities and insurance, Carnahan advised. These types of investments usually include higher than normal fees and can limit an investor’s ability to access his or her money for many years without paying a “surrender fee.”

A growing issue involves buying death benefits contracts, called viaticals. Brokers sometimes sell the life insurance policy of a terminally ill patient below the payment promised after the person’s death. The brokers claim the investor can collect the full value of the policy’s death benefit when the policy holder dies. Advances in medical technology keep people alive longer, which reduces the likelihood of a guaranteed return, according to Carnahan’s office.

The following plans on the list were included in NASAA’s Top 10 Traps in 2007.

Real estate investments often are considered to be “sure things” with little risk. However, they can involve significant risk, and investment scams featuring real estate are increasing.

Rising oil and natural gas prices have given rise to a number of traditional and alternative energy projects. However, many of these investments are highly risky and are not considered appropriate for smaller investors.

Con artists sometimes become friendly with church members, civic organizations or other groups, and then invite them to invest in their schemes. This type of scam is called “affinity fraud.”

Industry standards call for securities professionals to avoid unsuitable investment recommendations when considering a customer’s financial situation. Because they can earn higher commissions on some products, unscrupulous advisors don’t always follow those suitability standards.

Con artists try to bypass state registration requirements when selling investments such as viaticals or pay telephone and ATM leasing contracts. Consumers should not consider the sale of securities by someone without a valid securities license.

The tenth threat is prime bank schemes that involve the promise of high, tax-free returns. These scammers offer to let the “little guy” in on ‘exclusive investments from elite overseas banks.’ However, such banks do not exist.

To check out an investment or the person who is offering it to you, or for more information on investments and fraud protection, go to the Secretary of State’s web site at http://www.sos.mo.gov/securities or contact the Investor Hotline at 800-721-7996.

Paula Barr is a reporter for the Daily Journal and can be reached at 573-431-2010, ext. 172 or at pbarr@dailyjournalonline.com.