Bailout

When the rich get old

By Felix Salmon

Mike Konczal today comes up with something which in and of itself is reason enough to set up a Consumer Financial Protection Agency: ageing boomers. As David Laibson notes,

the prevalence of dementia among Americans ?explodes? after age 60, doubling every five years to more than 30% of the population over age 85.

These individuals are sitting ducks for predatory financial-services professionals, and it’s entirely right and proper for the government to step in and stop such thievish firms from extracting huge chunks of elderly people’s life savings.

The fact is that choosing a financial advisor is just as hard as picking stocks, and it’s statistically inevitable that millions of cognitively-confused Americans will choose badly. That’s not really their fault, and the CFPA, among other institutions, should hold all financial advisors to a strict fiduciary obligation, cracking down hard on those who end up costing their clients large amounts of money. This is not a role that bank regulators can or should have, and I certainly have no faith in institutions like Finra to grow any teeth when it comes to such matters.

So let’s get a CFPA up and running soon: the rich are becoming old fast, and that’s a potentially explosive combination.

Full post as published by Macroprudential on January 04, 2010 (boomark / email).