Most of us hear about unscrupulous family members taking advantage of their aging parents or grandparents. And everyone knows that internet scams abound. The one in which the scammer calls an elder and pretends to be a grandchild in trouble is notorious. And unfortunately, successful as it still goes on. Funds from grandma’s account get wired to Western Union and the thief disappears.
Financial elder abuse is rampant. The National Center On Elder Abuse puts the amount stolen from elders each year at $2.9B. But a privately run recent study calculated the amount at a shocking $36B+ per year. Who is doing this to our seniors?
Family members are the most frequent abusers of elders, because of access, exploiting the relationship of trust, and knowing just how easily manipulated a parent or other loved one can become with aging and dementia. Family members usually know how much money their parents have and how to get the parent to either give it to them or give them control over it so they can take it without the parent’s knowledge. Sadly, we see this often in our consulting work at AgingParents.com.
Caregivers, who also develop a relationship of trust with their care recipients, have the advantage of being with the elder in unsupervised situations. Ruthless caregivers get the elder to sign a power of attorney and being dependent on the caregiver, the elder may be fearful and intimidated if she does not acquiesce to the demands of the caregiver. In one case, a caregiver managed to steal $4M from a 74 year old client with multiple sclerosis who became physically unable to manage for herself. The caregiver got a power of attorney and opened 67 accounts in eleven banks. One bank finally caught on and reported their suspicions, but it was too late. The caregiver went to jail but the elder died before the criminal’s sentencing.
In spite of the easy access family and caregivers have to seniors, the most dollars are actually stolen from elders every year by professionals. That includes broker-dealers, insurance sales persons, lawyers and others in a position of both trust and authority to manipulate or outright steal elders’ funds. About a third of FINRA prosecutions involve elders. There are ripoff artists among us.
One thing that doesn’t seem to change over time is the reality that most cases of elder abuse go unreported to authorities and are therefore never prosecuted. The thieves get away with it. In one case we saw in our office, a 92 year old whose son had power of attorney for her took thousands of dollars from her bank account and refused to account for it. We were involved in helping her change the authority he had over her finances. I spoke with her and described that what her son had done was wrong and was a crime. She knew it was wrong and did not want to take action. Her response: “I don’t want my son prosecuted”.
Many elders are more frail and less willing to pursue legal remedies than a younger person may be. They suffer from shame, depression and embarrassment that they have been so taken in by anyone. Some just don’t have the energy to fight back and the thieves know this. They count on it.
What can the concerned financial professional do about financial abuse? There are ways you can be more vigilant and protective of clients than ever. Here are five things to keep in mind for any aging client.
- Know that even at the very earliest stages of dementia, a client is likely to be moderately impaired for making safe financial decisions. Pay attention to their ability or lack of it to understand complex or risky products such as non-traded REITS, which regulators disapprove of selling to seniors. Avoid suggesting or offering any products which require significant analysis by the client if you have even a hint of cognitive decline in that client.
- Know that age alone is a risk factor for developing dementia and its accompanying diminished capacity. By the time your clients reach age 85, at least a third of them will have Alzheimer’s Disease or other dementia. Two out of three persons affected by Alzheimer’s are women. Be especially vigilant with your aging female clients.
- Know your client. If he or she departs from a long standing spending pattern and you suddenly see unexplained large cash withdrawals, be suspicious, ask questions and probe. Someone could have gotten control over your client’s account. Don’t stand idly by. Get involved and find out. Report abuse if you suspect it. Take action to stop the abuse. Protect your client.
- If you work in an organization where professional colleagues have aging clients and there is opportunity to either sell them unsuitable investment products or otherwise manipulate these elders, lobby your organization for enhanced and more frequent scrutiny of all client accounts for people age 65 and up. The Federal Government and state laws define an “elder” as someone 65 and above. Watch those accounts more often and in more detail.
- Develop your own best practices, senior-specific policy, in writing. Training in best practices and commitment to your clients’ safety will enable you to get it right. Once you have a clear policy in place for yourself independently or for your organization, everyone can respond to red flags of diminished capacity and warning signs of elder abuse in a uniform way. That will enhance your ability to honor your clients so you can protect him from predators.
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