Saturday, July 30, 2011

There's gold in them thar (over the) hills


I couldn't just retweet @Dmacc502's mention of this Miami Herald article Reverse mortgage scam targeted seniors - I had to take some time to shout out that it's only going to get worse.


Big Target

The baby boomer generation is well-documented as the wealthiest generation in American history. It is simply a function of human nature and supply and demand that, where there is so much money, there will also be a proliferation of those motivated to try to get their hands on their own ill-gotten pieces of it.



The magnifying glass that sets fire to this whole pile of kindling is that the fears and health-related challenges of aging will create all kinds of opportunities for a well-crafted scam to drive a wedge of separation between people and their money.

It is to be kept in mind that, while the generation is the wealthiest, it doesn't mean every retiree is a millionaire, or that their net worth is liquid cash in a bank account somewhere. As large a group as they are, they are quite diverse, and there are plenty of people who worked long and hard, own property and a toy or two, and are just a scheme away from losing it all.

Whom can  you trust?

One key problem is that the threats are hard to detect. A "con" (short for "confidence") is a particularly creative enterprise because it requires that the perpetrator appear trustworthy. That takes investments in time and tools, it takes patience to set up and execute. Because we expect a crook to operate under cloak of darkness, unidentified, and move quickly to get in and get out, the crook who walks right up to us in broad daylight with a smile and a firm handshake and isn't in any hurry just can't be a crook, too. Right? Wrong.

A good con also depends upon the willingness of the victim to trust the perpetrator for the scheme to succeed. Greedy victims make greedy con artists rich, and also assuage their sense of guilt (if they actually had any) by being able to point out that the scam could only work if the victims weren't pure to begin with.

Surely though, I'm not suggesting that the victim is to blame, especially since there will also be growing numbers of opportunistic, unscrupulous "professionals," people in positions of trust who provide advise a layperson will be in no position to question.  It's not so much that people necessarily trust doctors or lawyers or accountants or judges or government agencies...it's that we haven't the knowledge to correct them when they start leading us down the primrose path.

Historic perspective on the new segment

For what seems like "forever", marketers have focused on the 18-39 segment. However, any business or industry that speaks to the needs of the Baby Boomers has a big pie from which to cut its slice. As fast food exploded in the 60s, real estate and the minivan in the 80s,  and new age gurus in the 90s, whatever the Baby Boomers need now is where money should be invested.

Like other industries (real estate, finance), “normal” has been dictated by the Baby Boomers for the last 50 years, which covers an incredibly long period of time in the minds of those who’ve been responding to the Baby Boomer demand profile for education, jobs, goods, housing, cars, investments, etc. The sheer size of this profile, with its demand power coupled with its heightened intra-competition, has driven growth at an incredible rate.


My jaw dropped in shock when venerable investment houses such as Bear Stears and other Wall Street institutions collapsed. Especially having gained a peek inside Bear Stearns culture from reading Alan Greenberg's Memos from the Chairman, I was convinced their stability was sure. The simple explanation is that the Baby Boomers had moved through their investing phase and are now in their wind-down phase – their demand is no longer there and their evacuation of the investment demand space literally pulled the rug out from under Wall Street. Left holding the bag, several firms that had been called institutions are now gone.


The same can be said for real estate. Double digit interest rates are a relic of the 80s, during the buying phase of the Baby Boomers. Their size flooded the demand pool, sending interest rates skyrocketing to try and temper the demand until the downturn of the early 90s.


Whether legitimate business or scam, there's will continue to be a whole lot of action in the Baby Boomer space.

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