A financial advisor recently told me that about half of her clients often express concern that their elderly parents may be vulnerable to elder financial abuse. The other half of her clients are the elderly parents. Sound familiar? As baby boomers continue to transition into the 65-and-older cohort at an estimated rate of 10,000 every day, you may have noticed that your clients are getting older too.
So, what should an advisor do when he or she suspects that someone is exploiting an aging client financially? Can an advisor share these concerns with the client’s family? What if the perpetrator is from the client’s own family? How does an advisor balance these concerns with the strict fiduciary obligation to protect a client’s privacy and confidentiality? These are difficult questions with no easy answers.
Congress recently attempted to solve some of these issues by passing a bill to protect elderly investors. The Senior Safe Act, currently under consideration by the Senate Banking Committee, would shield advisors, brokers and bankers from liability for reporting suspected elder financial abuse.
But, be careful what you wish for. Ronald Reagan once said that the most terrifying words in the English language are, “I’m from the government, and I’m here to help.” While the Senior Safe Act seems well intended, some wonder if the law would place the burden of evaluating a client’s cognitive ability on financial professionals who lack the medical training to make such evaluations.
In the meantime, financial advisors can help protect aging clients from elder financial abuse by better understanding what elder financial abuse is, why seniors are targeted, who the perpetrators tend to be, what are some of the warning signs and common scams, and finally, what preventative steps may be helpful.
What Is Elder Financial Abuse?
Elder financial abuse or exploitation is defined as the unauthorized, illegal or inappropriate use of an aging adult’s financial resources by a person in a position of trust. Financial abuse of a senior can be both criminal and a civil crime. It pervades across all social, racial and economic boundaries.
While not a new phenomenon, the number of reported cases of elder financial abuse have soared recently as the United States experiences a large-scale demographic shift to an older population. With an estimated 10,000 baby boomers turning 65 each day, a trend that is expected to continue for the next 10-15 years, elder financial abuse is largely a crime of opportunity.
Why Are Seniors Targeted?
Despite advances in modern health care and a greater awareness that diet and exercise can help stave off many forms of illness, the reality is that many of us will experience physical disabilities and/or cognitive decline in our later years. Our diminished overall health makes us vulnerable to others who prey on easy targets. Vulnerability is worsened for seniors who live alone, if there are no other caring adults around to provide basic checks and balances on financial management. Often, widows and widowers are more vulnerable than elderly married couples. Elderly women are targeted nearly twice as often as elderly men.
Many seniors are targeted for financial abuse or exploitation because of what they own. They may have retirement savings accounts, equity in a home, other investments, a steady cash flow of “mail-box money” from social security, annuities, pension income, or sometimes, all of the above. When Willie Sutton was asked why he robbed banks, he famously relied, “because that’s where the money is.”