Will 2017 shape up to be the year of senior financial protection? Legislative activity in Washington and various U.S. state capitals suggests policymakers recognize the urgent need to protect seniors against the threat of financial abuse. If enacted, these proposals will mark a positive step toward addressing what has emerged as a significant social problem for an aging nation.
With a rapidly growing population of seniors—an estimated 10,000 Baby Boomers turn 65 each day—the challenge of senior financial exploitation will only grow more pressing in the coming years.
According to one highly cited study by MetLife, at least $2.9 billion is lost due to media-reported cases of financial abuse of elders each year – and that figure likely understates the true scope of the problem, since many victims fail to report they’ve been exploited. That may be because they are embarrassed about being a victim; they fear losing their independence if they’re seen as unable to care for themselves; or they are unaware of the fraud.
But waiting for victims to report the abuse themselves is not enough to put an end to financial exploitation. So, policymakers and financial industry leaders are seeking to strengthen the system for reporting suspected abuse, in order to better protect vulnerable seniors before they become victims.
At the federal level, the Senior Safe Act, sponsored by Senators Susan Collins (R-Maine) and Claire McCaskill (D-Mo.), extends civil liability protections to financial advisors, brokers and firms who report suspected incidents of senior financial exploitation to authorities. This bipartisan legislation is supported by a diverse set of groups representing the financial industry, including the Securities Industry and Financial Markets Association (SIFMA), the Financial Services Institute, the Investment Adviser Association and others.
“The criminals who prey on our seniors are relentless,” Collins, chair of the Senate Aging Committee, explains in a recent interview detailing why the law is needed. “They will harass seniors over and over again until they have drained every penny.”
The essential rationale for the Senior Safe Act is simple: all too often, a financial adviser or broker-dealer may be the first to spot potential signs of financial abuse, exploitation, or fraud in a client’s portfolio.
Financial professionals may be first to notice suspicious patterns of unusual activity on a customer’s account, like atypical withdrawals or a sudden interest in highly risky assets that don’t track with the client’s previous investing practices. However, some advisors may be hesitant to step in out of concern about being held liable in court for what might be a violation of a client’s privacy.
The Senior Safe Act would shield financial firms and advisors from civil lawsuits if they report instances of suspected exploitation to law enforcement, adult protective services agencies or the appropriate regulator. In exchange, firms would be required to provide their employees with training on spotting the red flags that suggest financial abuse and fraud.
“If we can better protect our seniors from fraudsters in some of the most vulnerable years of their lives, we should use every tool at our disposal to do so,” McCaskill, a former prosecutor and ranking member of the Senate Aging Committee, explains in a statement. “We’ve got to give financial professionals the ability to combat fraud when they see it—while protecting the privacy of their customers—so that no Missourian’s life savings are at risk of exploitation.”
Federal action on senior financial protection is vital, but it’s only one part of the puzzle. Tightening laws at the state level is also critical.
In an interview with Project Invested last year, SIFMA’s Kyle Innes, Assistant Vice President, State Government Affairs & Assistant General Counsel, noted that the industry is also pushing for stronger protections at the state level, through such measures as “report and hold laws,” and improving communication and feedback between state investigative agencies and financial institutions once an incident of suspected abuse has been reported. Such measures would improve communication, cooperation and coordination between investigators and industry, and lead to a higher level of protection for vulnerable seniors.
In fact, 2016 was a banner year for moving forward state policies to protect seniors and vulnerable adults from financial exploitation, as this comprehensive list from the National Council of State Legislatures illustrates.
The enhanced attention from policymakers to tackle the scourge of senior financial abuse is welcome. But remember that one of the most important fronts in protecting seniors against exploitation will be in our own homes, families and communities.
If you have an aging relative, friend or neighbor who may be vulnerable to exploitation, take steps to help by recognizing the signs and keeping open lines of communication. That starts with awareness of the issue, and knowing how you can take action to help. Stopping exploitation before it becomes a crisis is the best medicine.
Other helpful resources:
Previously on Project Invested:
National Adult Protective Services Association
National Center on Elder Abuse
National Council for Aging Care