FA Viewpoint: Preventing Exploitation of Our Senior Clients

The following is a guest blog post by Amy Daniels, a financial advisor with Edward Jones. This post is part of SIFMA’s “Protecting Senior Investors” blog series, raising awareness and sharing information to help prevent elder financial exploitation. See our full series here

Financial advisors face many challenges, most routine, but a few that can be disturbing. High on this list is the growing financial exploitation of senior investors. I have seen it up-close in my practice, more than once, and I fear we will witness it many more times – unless we act.

The Threat

How big a problem is this? Estimates suggest that nearly $3 billion per year (The MetLife Mature Market Institute, 2011) is being taken from our seniors in cases reported by newspapers and other media outlets, often by family members or con artists who do not care for or about these seniors – and yet only 1 in 44 cases is reported to authorities (National Adult Protective Services Association, 2016). The exact extent of the problem is currently unknown, but just looking at those two statistics, we know that it is a staggering number, which doesn’t even consider the emotional impact exploitation has on seniors, their relationships and their family. With our senior population expected to grow by 10,000 individuals per day until 2030 (Pew Research Center, 2010), these problems will likely only continue to grow.

Who’s at Risk

Even those well versed in the technical aspects of managing retirement savings could become vulnerable, owing to some of the challenges older adults experience, like loneliness due to loss of a spouse, physical dependency or cognitive decline. Recent scientific studies show that financial decision-making often is among the first functions to decline with age (Halfmann K, 2015). Even the sharpest, otherwise highest-functioning clients can be at risk.

At a conference co-hosted by FINRA and SIFMA, Dr. Mark Lachs of Weill Cornell Medicine noted that the most preyed-upon age range is 80 to 89. They can be our clients, parents, grandparents, friends. Someday we may be in their places. Unfortunately, financial exploitation can happen to anyone, if they and the people who care for them do not take precautions. To do so they need our help.

First Line of Defense

We as financial advisors care deeply about our clients. We want to do good work. We derive great satisfaction from helping our clients achieve their financial goals.

That also means helping protect them from fraud. Financial advisors can help provide the first line of defense against senior financial exploitation. We owe it to our clients to help them safeguard their assets. The first thing we can do is provide education about fraud and how to spot it.

This can help get in front of one of the most common problems: many victims insist they are not being exploited. Seniors are prime targets for scams: affinity fraud, claiming to be from the same ethnic, religious, career or community-based group; suddenly-appearing needy “grandkids,” of no relation; tech support cons, promising to “fix” computers of technology-challenged elders; “you’ve won” lottery scams – some still involving Nigeria, believe it or not; and bogus Internal Revenue Service agents who offer to settle phantom back taxes by pre-paid debit cards. Fake charities, deed theft and foreclosure rescue, identity theft, credit card fraud, health care fraud, funeral and cemetery scams, the list goes on and on.

These are just the “outsider” problems. Perhaps, even more upsetting is insider exploitation, propagated by family members or other trusted individuals. A New York State study found that it accounts for an estimated 67 percent of all such cases (New York State Office of Children and Family Services, 2016). Those closest to our seniors – who should care for and love them most – are instead taking, even stealing, their assets, even their homes. In severe cases this can leave seniors, many who scrupulously provided for their own golden years and generously provided for their families, destitute.

Tools for Protection

There also are tools we can use. Trusted contact authorization forms, requesting that clients name one or preferably two individuals that financial advisors can contact when we suspect trouble, are available at SIFMA’s Senior Investor Resource Center and are being widely adopted. Many financial services firms have established specialized units dedicated to identifying and preventing senior exploitation, and have developed robust intranet sites with targeted resources to help advisors protect their clients. Together, we can work with family, trusted contacts, lawyers, accountants, tax preparers and others, including regulators and law enforcement task forces, to ensure that clients’ best interests are protected.

The solution can be as simple as reaching out to the client’s trusted contacts, who they themselves provided in a contact authorization form and are most often family. Suspicious directions may prove benign. Children can intercede to stop an obvious con. Asking concerned questions rather than ignoring warning signs can help avoid financial loss.. State governments are in a position to enact senior investor protection laws that provide financial advisors with voluntary reporting pathways and permits them to place temporary holds on suspect transactions; Washington, Missouri and Delaware have led the charge here. Indiana, Alabama and Louisiana recently have passed such laws. Federal rules and legislation modeled on these state laws, Federal regulatory guidance, and increased funding for Adult Protective Services (APS) can also enhance senior investor protections.

For much of the time and trouble that goes with these services, we will not be paid, but how much more do we gain by doing the right thing? Everyone wants to know how to maintain client accounts in the face of massive generational transfer. I suspect that heirs who know a financial advisor faithfully served their loved ones, and went out of their way to protect the assets they built, will elect to continue to trust and rely upon that advisor. I would.

Amy Daniels is a Financial Advisor with Edward Jones