Protect older clients from financial abuse


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Since AIG launched its Elderly and Vulnerable Client Care Unit in 2016, its manager, Michele Kryger, said he has examined thousands of potential cases of financial abuse of the elderly, with the number of such cases increasing by ‘about 30% per year.

These cases range from outright fraud or investment scams targeting the elderly to caretakers persuading their elderly to make financial decisions against their own interests. In other cases, family members could abuse their power of attorney. In fact, 60% of the time the abuser is someone who knows the client, Kryger says.

Kryger’s experience reflects a nationwide trend that financial and diet advisors are increasingly seeing. An analysis by the Consumer Financial Protection Bureau found that financial institutions reported $ 6 billion in losses or attempted losses due to suspicious activity on senior accounts from 2013 to 2017, the most recent period for which figures are available. The analysis suggests that the annual losses increased dramatically each year during this period.

The agency estimated the average loss for victims to be over $ 34,000, and those who were victimized by someone they knew lost nearly three times as much as when the perpetrator was a stranger. Some experts claim that the actual amount lost is probably much higher than the average figure, given that many victims choose not to report their losses, either because they are embarrassed or because they want to protect the person who is. hurt them.

“Customers have asked us not to tell their children that they have been financially abused because they don’t want them to know it,” Kryger says.

A 2018 report by the Securities and Exchange Commission (SEC) has suggested that financial abuse of the elderly is likely to continue to worsen as an aging and wealthy population begins to experience cognitive decline, which can make them much more vulnerable. While there is not yet solid data available on the increase or decrease in financial abuse during the COVID-19 pandemic, some experts believe the increased isolation may have made some customers older more vulnerable to financial abuse.

“Whenever you have people locked in and isolated, especially elderly people whose families are not allowed to visit and who cannot go to their professionals, you are going to see an increase in scams,” says Liz Loewy. , co-founder and COO of EverSafe, a financial wellness platform for seniors and caregivers. “Fraudsters know it and they take advantage of it. “

Often, financial advisers are the front line workers when it comes to preventing, identifying and reporting the abuse or financial abuse of older adults.

“Financial advisers can often see symptoms of abuse before anyone else, and they can also help identify cognitive decline, even before family members,” says Ryan Bertrand, vice president and general manager of advanced markets at Transamerica. “While [clients] might avoid certain situations in their daily life, there are necessary conversations they have with a financial advisor that can expose cognitive impairment.

Spot the red flags

Elderly customers are vulnerable to fraudulent schemes in which unknown criminals cheat them out of their money, as well as situations in which people they trust, such as friends or family members, exploit them financially. Financial advisers should stay alert for signs of both of these issues. Specifically, sources mentioned the following red flags:

  • Sudden changes in banking habits or actions contrary to previously discussed goals. This may indicate that a schemer has convinced the client to take financial action that is not in their best interests, especially if they are unable to explain the changes.
  • A change of power of attorney or the addition of a new person to a joint account. While this may be a sign of smart estate planning, it is also an opportunity for individuals to gain significant financial power that they can more easily abuse.
  • A new person moving in with the client or suddenly getting involved in their personal life. Romantic plans, in which a purported love interest benefits the elderly, have become more and more common, but family members who are suddenly interested in a grandparent or other elderly relative also require more consideration. thorough.

Jeffrey Sharp, director of SilverStone Group, an International Hub company, says he has received phone calls in the past from a child, niece or nephew of a client, saying, “I’m taking care of it. mom’s business now. She’s out of money and we need $ 10,000 transferred to pay some bills. “

“Immediately a red flag goes up,” says Sharp. “You really have to have a fair amount of skepticism as a counselor when you start getting calls from third parties. “

To take part

Registered Investment Advisers (RIAs) who believe a client is being exploited or the victim of a scam have an ethical obligation to act, as well as a legal obligation to do so in most states. Depending on the circumstances, it usually starts with a phone call to the company’s compliance or legal department for advice on next steps, Bertrand explains.

“Compliance departments usually have a proscribed list of what should happen when dealing with clients in this situation,” he says.

Many times a simple phone call or conversation with the client, or with a trusted contact or other family member with whom the counselor has a relationship, can clear up the matter, he says. If such efforts are not possible or are not satisfactory, counselors may need to contact their state’s Adult Protective Services program or law enforcement.

These agencies may soon have more resources to investigate such cases. The US House of Representatives is considering a new bill, the Elder Justice Reauthorization and Modernization Act of 2021, which would authorize an additional $ 1.4 billion for national and local adult protective services .

In some cases, advisers may simply have to decline to immediately complete a client’s request while a confirmation (or investigation) is taking place. Depending on the circumstances, the Financial sector regulatory authority (FINRA) allows advisers to temporarily suspend a client’s account if they believe that client is being exploited financially.

“Time is the thief’s enemy,” says Judith Kozlowski, senior researcher at the Women’s Institute for a Secure Retirement and subject matter expert with the Justice Department’s Seniors Initiative. “The longer the financial institution can extend the time for real money to leave the account or for securities to be transferred, the better for the person being exploited.”

Prevent potential problems

In addition to taking swift action upon detecting or confirming financial abuse, there are several steps advisers can also take to ensure their clients don’t become victims of financial abuse in the first place.

“Counselors should plan ahead for a crisis because you won’t get a lot of warnings if an aging client has a problem,” says Loewy. “Cognitive issues can arise almost overnight, and counselors need to look for ways to be holistic and deal with these issues.”

Internally, this requires training advisers on the signs of financial abuse and a set procedure they can follow if they suspect financial abuse. Sources pointed out that while advisers have been trained by a financial institution on how to spot red flags, they are granted immunity under the Act. Seniors Safety Act when they report suspected financial abuse of clients.

In dealing with clients, prevention begins with ensuring that all clients have at least one “trusted contact” on file, experts noted. FINRA began requiring advisers to obtain this information from clients opening new accounts starting in 2017, but advisers should consider reaching out to clients they have worked with since before that date to add a trusted contact to their file.

In addition to just having the name of a trusted contact, it can be helpful to establish a relationship directly with that person or with other family members of the client, experts say. That way, if a problem arises, the advisor can call that contact to discuss and resolve it as quickly as possible. In some cases, advisors may suggest that the client’s family members receive read-only copies of financial statements, which allows them to see activity but not initiate transactions.

Sources also said that counselors can also work with their clients to educate them about the dangers of financial abuse of the elderly, including discussing common scams they might see and warning signs they might. be a victim. Making sure clients have a solid estate plan (and referring them to an estate planning lawyer if they don’t) can also thwart scammers.

“Advisors must be diligent in guiding their clients to get their documents, wills and powers of attorney in order,” says Kozlowski. “Even though this is just a checklist at their annual meetings, it’s critical to make sure they’ve done these things. “

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