When Bob Gloor decided to hire someone to help with his investments, he dug up the business card of a financial adviser who had spoken at a seminar years earlier.
The Phillipsburg resident turned over his investments, worth about $400,000, to Wayne Schultz, an attorney and licensed stockbroker. When Gloor inherited $25,000 after his father's death, Gloor asked Schultz for advice on investing that money, too.
Schultz suggested using the inheritance to buy private stock in the brokerage firm that he co-owned.
"He said, 'That's where I have all my money,' " recalled Gloor, 64, a recently retired salesman. "I had complete and utmost confidence in this guy."
That confidence turned out to be misplaced. Gloor, surprised by a $900 management fee for the brokerage stock, called the bank that imposed it. When he asked that the fee be taken out of the holdings, he was told the stock was worthless.
Schultz, who still works as an adviser, declined to comment, citing client privacy concerns.
Gloor's attorney, Mitchell Cobert of Morristown, said Schultz used his position of trust to recommend investments that were unsuitable and inappropriate. Gloor was able to get back his $25,000 through arbitration, but a good portion went to attorney fees.
Gloor's unfortunate experience is far from isolated. While investors of any age are susceptible to unscrupulous investment advisers, older people are even more at risk. One out of every five Americans older than 65 — more than 7.3 million people — has fallen victim to financial fraud, according to the Investor Protection Trust.
With the stakes so high, investors need all the help they can get. In New Jersey, a new law prohibits financial advisers from using misleading titles such as "senior adviser" or "senior financial expert." Violators face suspension or loss of their broker license and possible five-figure fines, said Debora Whipple, investor education director at the New Jersey Bureau of Securities. AARP New Jersey was a prime force behind the new law.
"They are conveying a level of experience, knowledge and expertise" they may not have, Whipple said of advisers using such designations.
Where to get help?
- The Bureau of Securities regulates financial firms. Call 1-866-446-8378 toll-free to find out whether the financial representative is registered or has been the subject of complaints.
- You can check a broker's record online through the Financial Industry Regulation Authority's BrokerCheck, which provides details about an individual's work history, complaints against them and any disciplinary actions. The same report is available at 1-800-289-9999.
- The Securities and Exchange Commission also offers online access to registration and background information on investment firms and individual advisers.
Whipple said there are other warning signs of unscrupulous advisers: using scare tactics to get people to invest in a product, promising guaranteed returns, pressuring people with limited time offers or embarrassing them if they ask too many questions. "An investor has to take the time to think: Is this real?" she said.
If you suspect something is fishy, call the Bureau of Securities.
A FINRA arbitrator said Schultz's recommendation of the brokerage stock was "not a suitable investment" and ordered him to return the $25,000 to Gloor, who moved to Fort Mill, S.C., in July.
Gloor transferred his $400,000 IRA to a well-known retail brokerage firm, where an adviser helped him reverse the annuities that Schultz chose.
"This guy was the consummate salesman. He had me hook, line and sinker," Gloor said. "I learned a hard financial lesson."
Greg Saitz is a freelance writer based in Madison, N.J.