Resource #9: Avoid Church & Rotary In Retirement

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As shocking as this may sound, when it comes to planning and investing your retirement savings, religious and civic organizations are quickly becoming places to avoid. In the not-so-distant past, you could rely on the fellow who lead the pledge of allegiance or said the deeply devotional group prayer, but the growing trend of Affinity Fraud suggests those closest, and most like you, should be kept the furthest from your life savings.

Unlike “hate” crimes that are committed across racial, ethnic or religious lines, Affinity Fraud targets members of identifiable groups, such as religious or civic organizations, ethnic communities, elderly people and even professional associations.

Fraudsters infiltrate a group and seek to exploit the trust and friendship among its members. Often times they get a long-standing or high ranking member(s) of the group to unwittingly endorse the scheme and the scam spreads faster than a California wildfire.

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Of course, the most notable of Affinity Fraudsters is Bernie Madeoff who bilked an estimated $50 billion dollars of investor’s money, primarily from the Jewish community. Alan Stanford is alleged to have targeted Latin Americans and Southern Baptists, while Ephren Taylor allegedly duped millions from widows to the well-educated.

According to one estimate, Affinity Fraud losses in America could total as much as $50 billion. The FBI is reportedly probing over 1,000 cases of investment fraud, more than double the number outstanding in 2008. While these estimates include cases large and small, a major challenge in getting reliable numbers lies in the fact that many victims choose not to report it. They may feel embarrassed or that they should have known better, and in some cases, especially small close knit groups, they may try resolve the issue by themselves in an attempt to save face.

Not surprising that this type of fraud is on the rise considering the state of the economy. When times get tough people can become more vulnerable and wiling to trying something out of the ordinary to remedy their financial woes. Whether an investor was forced into early retirement or their savings can’t generate enough income for their golden years, the idea of a quick fix can become very appealing despite outrageous promises and commitments.

A sample list of SEC Affinity Fraud cases below suggests that retirees, churches, and ethnic groups can be the most popular targets. Unfortunately, many victims receive only pennies on the dollar, making retirement extremely difficult for those who don’t have the time or capacity to replace lost savings… not to mention the shame, guilt, and anger it can leave victims grappling with every day.

SEC Sample Cases

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The third case highlights the true influence of Affinity Fraud. According to the SEC release, Abraham L. Kennard promised to pay a return of $500,000 for each $3,000 investment. This begs the question, who in their right mind would think that is possible? Of course, the answer is, no one in their right frame of mind would believe that, which is exactly why affinity fraud is so dangerous. It catches investors when their guard is low but their trust is high, and once a co-worker or colleague confirms its working for them, the sounds of a cash register ringing can silence more rational thoughts.

Retirees and investors alike can begin to guard against Affinity Fraud in three ways: First, “don’t take any short cuts with your money” suggests Lou Straney, an affinity fraud expert and author of An Investor’s Guide To Loss Recovery. Just because you know someone doesn’t mean you can or should skip the paperwork until later. Straney adds, “It’s not that you can’t trust people, you just have to doubt everything.”

This is particularly true for those in or near retirement who simply can’t afford to become a victim. Retirees need to be extra diligent in vetting financial advice, making sure all the i’s are dotted and t’s are crossed in the beginning, not the end.

Second, retirees need to have a process for verifying their assets through an independent third party. One of the biggest factors that allowed Madeoff and other fraudsters to run their scams for years without detection was because they manufactured their own client statements. Account numbers and monthly balances only existed on paper.

Retirees can learn from this by requiring every financial relationship to have some form of third-part asset verification. For example, my investment management clients receive their statements from a third party custodian like TD Ameritrade instead of directly from me.

They can also access their account information via the web or a toll-free number to monitor account progress, fees, and transfers without involving me.

Finally, get everything in writing. Doing so should help reduce the impact of being caught up in the moment and making a very emotional and costly decision. While common sense should apply, it’s just not that easy when a trusted friend is making the investment pitch instead of a total stranger.

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Therefore, no matter if your pastor urges you to invest in something because "God wants you to be blessed with riches" or a member of the “good old boys club” offers you the opportunity to make money hand-over fist with them, don’t give anyone a dime of your money until it’s all in writing and can be verified by someone outside of the group.

Retirees don’t necessarily have to steer clear of religious organizations or do a back-ground check on every member of their rotary club, however, they do need to recognize that their situations and affiliations may make them an ideal target for Affinity Fraud.

While there are plenty of legitimate investment opportunities for retirees, be wary of those closest to you, especially those who have stumbled upon a fail-proof process for producing uncommon results.

Next Steps

1) Share your feedback.

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3) Develop A Plan For The Non-Financial Aspects Of Retirement

Robert Laura’s ground-breaking book Naked Retirement is the No. 1 resource in helping people begin to think about and plan for every day life in retirement. To Learn more and save 10% click here.  

4) Consider Making An Impact As A Certified Retirement Coach

Did you know there is a growing group of people who have been trained to help people plan for the non-financial aspects of retirement? Too often, new retirees learn things the hard way and waste some of the best years trying to figure it out, which is why we created the Certified Professional Retirement Coach designation. It’s a certification that positions you as a retirement expert, equipped with skills, tools, and resources to help people make a better transition. Click here to learn more, and take the first module free with this link.

About the Author:

As the Retirement Activist, Robert Laura created the Retirement Coaches Association and He is the leading voice for the retirement coaching industry and has pioneered many tools and resources to help people prepare for the non-financial aspects of retirement including the Certified Professional Retirement Coach CRPC training and designation.

He is the author of several books and guides including Naked Retirement and Retirement Rx. He is also a nationally syndicated columnist for and Financial Advisor Magazine. Robert is a sought-after corporate trainer, speaker, consultant, and financial expert witness. He can be reached here