On a larger scale, financial institutions should have extensive compliance policies in place to combat and report elderly financial abuse. Broker-dealers and investment advisors should conduct regular education sessions for brokers and advisors but also operational and support personnel so that every employee is able to recognize instances of exploitation.
And, it must be recognized that sometimes perpetrators come from within. Compliance and supervisory organizations at these financial firms should prevent brokers and advisors who have discretion, power-of-attorney or signing privileges on accounts of elderly or vulnerable investors. It is also crucial to establish clear protocols and procedures for reporting any instance of financial abuse to the firm’s compliance organization and branch supervisors, and it is just as critical to ensure advisors know and are following these procedures.
Even with all these regulations and efforts, when offenders do get apprehended, the consequences may not be enough. As much as Finra and the SEC’s Office of Compliance Inspections and Examinations actively prosecute, disbar and expel individuals found to be party to this type of fraud, the research indicates that instances of financial abuse are only increasing. Our industry may just not be disciplining its own offenders as hard as it should be, which is why it is essential to have processes in place from the start to ensure abuse does not happen. Innate checks and balances within financial institutions should be rigorous and effective enough to counter any potential exploitation, especially when it comes from trusted loved ones.
Financial institutions can play a significant role in detecting and preventing elder exploitation. It is not just crucial for advisors and firms to confirm their compliance—it is necessary to educate and ensure this trend is halted and that our laws and regulations are efficiently and successfully protecting our most vulnerable citizens.
Martin Orbach is the vice president of compliance solutions for DST.