FINRA’s Helpline for Seniors Leads to FINRA Investor Alert, Warning Against Ads for “High-Yield CDs”

By Brendan Studley

Last summer, our blog featured a post on FINRA’s new Helpline for Seniors. As some unsavory brokers continue to develop new ways to victimize investors, the helpline aims to protect the public by providing a welcoming and open resource for callers get to the bottom of any questions or concerns. In February 2016, the FINRA helpline is already reporting success as many callers have phoned in to get advice on their investments.

Specifically, the helpline has fielded a number of calls that alerted FINRA to a new strategy that investors should be wary of. This new strategy—which involves advertisements promoting “High CD Yields!”—prompted a FINRA Investor Alert in February 2016 to warn investors of this “too good to be true” deal.

FINRA explains that the while some promotions of this type could be legitimate, others are merely bait to get customers “in the door” where a savvy salesperson attempts to persuade investors to purchase a different product, like an annuity, in addition to the special “high yield CD.” Sometimes, the salesperson indicates that these products also include further incentives like “bonus” cash to make the deal look even sweeter. Further techniques include telling investors that the products are an exclusive and special offer in limited supply, and that they are risk-free avenues to increased wealth. Salespersons sometimes include other incentives in the deal, like free meals or other special offers, to make potential clients feel as though they are now obligated to return the salesperson’s favors.

Unfortunately, as discovered from Helpline callers, these products have ended up being a new way for salespersons to earn unnecessarily high commissions at the expense of their client, who could now be stuck with a risky, unneeded product that may not be FDIC-insured, rather than a bank CD. In fact, FINRA reports that investors should consider checking with their state’s insurance commission because some products being pushed on customers are actually various types of insurance. On top of paying high commissions, the products could include further fees down the road, and investors “generally must commit a sizable minimum purchase amount, such as $25,000.”

To avoid falling victim to any such ploys, investors are encouraged to continue to reach out to the Helpline, and seek other advice from additional FINRA resources like BrokerCheck.