Investment professionals must understand the challenges their clients face at every stage of life. For senior and elderly clients, advisors are on the lookout for financial abuse.
Financial abuse occurs when someone misuses the assets of a vulnerable person. Senior citizens are prime targets for this type of profiteering. With more than 10,000 people turning 65 years old each day through 2030, the threat is only increasing. According to reports, at least $3 billion is lost annually in media-reported cases of senior fraud. Technical advances have created additional avenues for exploitation. The National Adult Protective Services Association (“NAPSA”) notes that the vast majority of financial abuse reports involve perpetrators that are close or related to the victim.
Here are some of the most common types of senior financial abuse and how advisors are countering them.
NAPSA lists telemarketing scams as a common form of financial abuse. Perpetrators phone victims congratulating them on lottery “winnings.” Or, they pose as I.T. professionals warning of a “virus,” or claim to be an individual in need of help. They use these false pretenses to solicit money. They might obtain a victim’s credit card number and use it without authorization.
Some Certified Financial Planners specialize in working with certain types of clients, including retirees and seniors. Advisors further educate their clients not to disclose personal information, including Social Security number, over the phone. They also advise them not to pay fees or taxes by phone, email or pre-paid debit cards. Instead, they suggest having a client ask for details in writing and consult with an attorney or financial advisor before making any decisions involving money. Another strong solution is signing up for programs like NoMoRobo (generally free for landlines), which can actively screen out incoming calls from telemarketers and other robo-callers.
Signature Coercion or Forgery
Seniors can be subject to isolation, loneliness, and physical or mental disability. They may not always catch unscrupulous business people or scammers. Commonly, senior fraud occurs when individuals unintentionally sign away assets or their signatures are forged on legal documents.
According to the Women’s Institute for a Secure Retirement and SIFMA,
Education and awareness are two key strategies to preventing and responding to elder financial abuse. Someone close to the victim, either a relative or close friend, often exercises undue influence. Many cases of undue influence go undocumented because seniors hide or minimize the abuse and protect the abuser in order to avoid conflicts within their family. Also, dishonest guardians, conservators, and those given Power of Attorney can exercise undue influence. To help determine if the senior is being unduly influenced:
- Explore the relationship between the senior and the suspected perpetrator
- Asses the total situation
- Document discrepancies
The Financial Services Institute (“FSI”) has created an Elder Abuse Resource Center. It contains reporting information from each state. No matter where they are, advisors have access to local tools for identifying and reporting senior financial abuse. The FSI has also compiled a database of federal resources and government works on elder financial abuse. These resources include the Financial Crimes Enforcement Network (FinCEN) advisory on elder financial exploitation, and the Financial Fraud Enforcement Task Force.
Bank Account Theft
Senior clients may be vulnerable to pure credit and debit card theft. Whether their card is stolen or their bank account information is illegally obtained, seniors who are not tech-savvy may not notice large amounts of money leaving their account until they review their printed account statement.
In 2016, the House of Representatives passed bill H.R. 4538, the “Senior Safe Act.” The bill protects financial advisors and institutions from legal liability for disclosing the financial exploitation of senior citizens. Advisors are also receiving training on identifying and reporting suspected elderly exploitation. The American Bankers Association educates employees to keep track of unusual activity, including large withdrawals, mysterious transfers, and automatic payments setups.
If you suspect possible bank account theft, it is important to notify both your financial institution and the authorities.
Personal Care Scams
Predatory individuals may seek employment as personal care attendants, counselors, or maintenance workers in order to gain access to a wealthy older person’s home and assets. They may also pose as new friends or love interests, and request unorthodox payment arrangements outside of a standard legal contract.
Financial advisors are doing their best to be aware of and investigate red flags, such as new “best friends” and romantic interests late in life, missing items from the home, and persistent interest in the details of long-standing financial arrangements.
For example, RBC Wealth Management documented a case from 2015, in which a series of irregular transactions occurred in an elderly individual’s account. The advisor brought the case to his supervisor and compliance officer, who discovered that the client’s caregiver was involved. The client had no knowledge of the transactions. In response to cases like this, FINRA, as well as many States, have established new “Report & Hold Laws,” which allow broker-dealers to temporarily delay a disbursement or transaction in order to provide time for the state to investigate. Under these new programs, financial institutions can help make sure money doesn’t leave an account when red flags are raised.
Fraud from within the family is widespread and prevalent. In fact, it is considered to be the most widespread form of financial exploitation. It occurs when a client has a family member who feels entitled to their assets, or is worried that they will lose access. Family members may create confusing new financial arrangements “as a favor” on the client’s behalf.
In addition to the “Report & Hold” programs discussed above, several financial institutions are creating their own programs and partnerships to curtail senior financial abuse. For example, Fidelity recently launched a partnership with EverSafe, a technology monitoring firm. The EverSafe program provides daily scans of financial accounts and credit reports to find suspicious activity. The program also provides support to financial advisors through education and insight. FINRA also launched in April 2015 FINRA launched the Securities Helpline for Seniors. The hotline exists so that senior investors can raise concerns about issues with their investments and brokerage accounts. To date, the helpline has received more than 4,200 calls and have helped seniors recover more than $1.3 million.