Fraud on the Elderly Alert: Should You Trust That Trusted Advisor?
When most people think about elder fraud, they imagine internet phishing swindles, telemarketing scams, and other rip-offs coordinated by invisible strangers likely hundreds of miles away. But more and more, seniors are being victimized much closer to home, often at the hands of financial advisors and other supposedly legitimate professionals in whom they’ve placed their trust.
Seniors Lose More When Scammed by Someone They Know
According to the U.S. Consumer Financial Protection Bureau (CFPB) seniors (over age 70) lost an average of $41,800 to elder financial exploitation between 2013 and 2017. When the fraud involved strangers, individual losses averaged around $17,000. But when seniors were ripped-off by someone they knew and trusted, the average loss ballooned to more than $50,000. “This is big business, perpetrated by actors people think are legitimate,” Shawna Reeves, director of elder-abuse prevention at the Institute on Aging, recently told Bloomberg News.
Elder Fraud Impacts More than Just a Victim’s Wallet
Who are these scammers? Sometimes, they’re greedy relatives and trusted caregivers. But just as frequently, seniors are taken by a trusted financial advisor, lawyer, or other so-called professionals with seemingly legitimate credentials. Once they’ve established a relationship, these scammers will use that trust to access bank accounts or sell their victims on ill-advised annuities and reverse mortgages, solar panel installations, and even access to veteran’s benefits. For many, these scams hit far deeper than their wallets. In fact, research suggests seniors who experience elder fraud at the hands of someone they trust are more likely to die prematurely. “Where do you go after you’ve been exploited by a professional you thought you could trust, and you are now at perhaps your most vulnerable state? Another ‘trusted’ professional?” Chantelle Smith, an assistant attorney general in Des Moines, asked Bloomberg. “They die. It kills them.”
Legitimate Financial Advisors Have Tools to Prevent Elder Fraud
In one recent survey, more than 60% of financial advisors said they had seen or suspected financial abuse of an older client at least once, often at the hands of another financial professional. Yet more than half admitted they had done nothing to report the crime. But the fact is, financial advisors, do have several tools at their disposal to protect elderly clients. The Financial Industry Regulatory Authority, for example, allows broker-dealers to put a hold of up to 15 days on the disbursement of funds in the case of suspicious transactions. They’re also required to request retail clients to provide the name of a trusted contact person who could be notified of possible fraud. A federal law called the Senior Safe Act even protects financial advisors and their firms from liability when they take action in such cases.
Banks Need More Tools to Combat Elder Fraud
In 2017, banks and other financial institutions filed over 63,000 suspicious activity reports tied to the financial exploitation of older adults. Yet according to the CFPB, that figure represents less than 2% of actual incidents. While financial institutions have become better at spotting and reporting suspected elder fraud, and more are investing in detection software and training to combat these crimes, much remains to be done. Marti DeLiema, an assistant professor of research at the School of Social Work at the University of Minnesota, Twin Cities, told Bloomberg that financial institutions “need better communication across lines of business. For example, the brokerage side needs to talk to the banking side if they suspect a customer is at risk.”
She also suggested banks and other financial institutions would benefit from the same types of rules that currently govern financial advisors and broker-dealers, including the requirement for a trusted contact person. “Banks need to do that,” DeLiema said. “Banks need another tool in their toolbox to protect us from ourselves.”