Financial Fraud Lawyers shares its expertise with you.
In February 2023, the AMF (the French Financial Markets Authority) published the academic report Pratiques commerciales et populations vieillissantes (Commercial Practices and Aging Populations), carried out by SciencesPo, Université Paris-Dauphine and Université PSL. As the study demonstrates, it appears that it is becoming increasingly complex for sales representatives of banking and financial institutions to identify the capabilities of their interlocutors. This presents a risk for all parties, whether the consumer, the financial institution, or the official regulators in place.
(I) Summary of the academic report
a. The challenges of marketing complex financial products to seniors
As the study explains, there are several issues involved in selling certain financial products to certain populations:
• Customers must be offered financial products tailored to their needs, otherwise there is no reason for them to invest their capital with a financial organization. In the medium and long term, their objective is to grow their initial investment, not to gradually lose all their capital.
• The financial or banking organization has an economic stake: as a profit-oriented private company, it must put in place the means to generate income. However, it must also ensure that its customers are satisfied, otherwise there is a risk of losing customers and damaging its business model.
• The financial regulator in place has an interest in harmonizing the economic relationship between financial organization and consumer, otherwise its reputation is tarnished, leaving room for more abuse when marketing certain risky products. If the regulator does not actively protect consumers, or is unable to balance the rights, duties and responsibilities of financial organizations, it can no longer be considered an authority figure.
Aging populations in particular are difficult to understand and deal with, firstly because existing systems for identifying the type of potential customer the sales representative is dealing with are not sociologically adapted to these distinctions and specificities. Indeed, how can the relationship between age and ability be defined today?
Secondly, the sales representatives of such financial organizations are not equipped to deal with such situations, as they sometimes find themselves in a paradoxical situation when dealing with elderly customers: at what point does their advice become intrusive towards the consumer, at what point does their advice run counter to their employer’s economic interests?
b. Defining “vulnerability”, understanding consent
In social sciences, we make the distinction between trois age concepts, as per the academic report:
“Age is a complex category. Social sciences have distinguished between chronological age (the number of years lived), biological age (the aging of the body) and social age, which corresponds to the stages of life.”
Vulnerability, as defined in the report, concerns the suitability of a type of financial product for the individual to whom it is offered. In theory, this product-consumer match is the responsibility of the sales organization, which is in a position to distinguish the products it offers for sale, their particularities and therefore their harmony with the customer’s prerogatives.
This notion of product-consumer fit is particularly important when dealing with seniors, whose needs and abilities are more complex to determine. Their willingness to choose certain financial products is difficult to estimate due to the varying abilities of seniors, and particularly so for salespeople who have not been trained in the social sciences.
We also need to consider the risks incurred by financial organizations and their sales representatives when assessing both vulnerability and consent. For this reason, it is essential that the regulator in charge considers such issues and proposes solutions adapted to all parties. Only a competent authority can provide a neutral and distanced regulatory framework.
(II) Application to trading operations
As mentioned in the academic report,
“It is therefore necessary to understand the classic way in which financial products are marketed, in order to assess their potential unsuitability for people considered to be elderly.“
a. Implications for the Forex & Crypto industry
Older people are, in theory, less familiar with emerging technologies and how they work. Considering the findings of the academic report, there is a case for targeting seniors when canvassing new customers for trading platforms.
The report demonstrates the difficulty of accurately and objectively defining the “vulnerability” of the elderly with regard to the banking products that can be offered to them. It would be necessary to determine which types of financial products are suitable for seniors, and to ensure that their consent is informed. However, these questions do not seem to be applied to alternative financial systems and products, specifically in the Forex and Crypto industry.
A Forex or Crypto sales representative can easily gain the trust of such a potential customer by adopting a complex technical discourse which on the one hand attests to his expertise, and on the other places the customer in a position of credulity. The aim is to convince the potential customer, so it’s possible to find yourself up against unscrupulous individuals whose sole aim is to take advantage of their customers’ lack of knowledge of the Forex or Crypto market.
In the course of our legal practice, the lawyers in our network have been called upon to defend a significant number of elderly people, who have been specifically canvassed by sales representatives of trading platforms for the reasons mentioned above. This is the case of our client, who found himself the victim of financial fraud, and whose experience was shared on the French TV channel B SMART.
b. Financial Fraud Lawyers to defend traders
Our network of law firms represents and defends the interests of Forex, CFD, binary options and crypto traders in Europe. Our goal is to help victims of non-compliant trading practices recover their lost investments.
• Is there an ideal target for trading scams?
Following the academic report published by the AMF, it appears that senior citizens are a prime target for abuse. They hold statistically more capital, and are theoretically less familiar with new alternatives to the banking and financial systems.
• How can I identify manipulative sales techniques?
When it comes to regulated financial organizations, there are several warning signs of non-compliant sales practices. In particular, aggressive canvassing (daily contact) and promises of secure profits.
• Is there any recourse in the event of abuse by my broker?
First of all, you need to determine whether the broker is regulated by the financial authorities, or whether he or she is acting outside any regulatory framework. In either case, it will be possible to initiate legal proceedings, but it is important to understand that only a regulated broker is bound by certain commercial practices and a duty of transparency and protection towards its users.
• How can Financial Fraud Lawyers help you?
The lawyers in our network will support you throughout your dispute and provide you with legal advice tailored to your situation. We collaborate with financial experts who assist us in the technical analysis of the most complex cases. Our job is to help you recover your lost funds within a legal framework.
The Financial Fraud Lawyers network aims to inform private investors (traders) of potential malpractices by Forex and CFD brokers. Our mission is to assist and protect traders when they encounter brokerage practices that go against their interests.
Our articles are intended to warn, share and inform the public about the legal risks of Forex and its players. Trading financial products and CFDs as well as investing on online platforms carry legal risks.
The article was written in good faith, based on public information and client testimonials valid at the time of publication. Our articles concern the protection of the interests of individuals on online investment platforms and are published in accordance with our right to inform the public about our activity. This article is not to be considered legal advice.