Finance 101: How to help avoid elder financial abuse

Abuse costs seniors more than $36 billion a year.

0

America is growing older. Every day of the week, 10,000 people turn 65. This is what has been referred to as the “baby boom bulge,” but even without this incoming wave, we already have tens of millions of older Americans. And those people are expected to live longer than any preceding generation in history.
The older people in our country have contributed much to what the country is today, and should be viewed as a valuable asset. The problem is that with a large and growing elderly population, the potential for elder financial abuse grows. They are an especially appealing target, given that they have an estimated 70 percent of the country’s personal assets, and the potential to be taken advantage of. This abuse can be in the form of telemarketers, get-rich-quick schemes, new “friends,” unethical financial advisors, and, most sadly, children/ family members or other trusted acquaintances.
By one estimate, from a study done by True Link Financial, this abuse costs elders more than $36 billion a year — $36 billion is a very big number.
It can happen for a range of reasons: loneliness, cognitive impairment, or even feeling isolated. One of the elements of this issue is that it barely ever gets reported, or even acknowledged. By some estimates only 1 case in 40 ever gets reported. That can be understandable. Many times elders will feel embarrassed by their exploitation, and won’t want others to know for fear of losing their autonomy.
So what can be done about this? The following are some of my thoughts.
— If you have elderly parents or other elders you care about, you should have a candid talk about how they are managing their finances. Ideally this discussion starts earlier in their retired years.

  • If someone is already acting to assist them in this way, it makes sense that someone else also be involved to safeguard against that person acting abusively. This is especially true if they have a power of attorney to manage the elder’s finances.
  • Be alert for new friends in your seniors’ lives. There are many people who are experts at gaining the trust of older people in order to gain access to their finances.
  • If you are already helping an elder, you should be receiving duplicate bank statements and investment account statements.
  • If that elder has investment accounts, be on the watch for lots of activity, and big changes in the investments they hold. Realistically, you should meet and discuss the elders’ accounts with that financial advisor to get a sense of how they work, why the elder holds the investments they do, and more important, how the advisor gets paid.
  • Try to be on the watch for investment seminars with free dinners or other perks. Those free dinners are often incredibly expensive. At least warn them to avoid these events, as it could save them a lot of money and grief.
  • Frequently, if they use an advisor, the original advisor is long gone and the elder has been passed down to other advisors, oftentimes more than once. The original relationship may have been good, but now the elder may have no real idea why they are working with the advisor they have. You can review the disciplinary record of any broker or advisor that an elder may be using to ensure they don’t have a record of bad financial dealings. You can do this at the FINRA website by using their “Broker Check” page (brokercheck.finra.org).
  • If you have confidence in that financial advisor, after a thorough review of their services and compensation, then you may want to ask them to hold on file a special document called a Letter of Diminished Capacity. This allows an advisor to contact a family member if they see a noticeable decline in the elder’s cognitive capacity or behavior.

Ultimately, protecting elders comes down to a greater involvement in their lives. They may feel they don’t need that help, but gentle persistence should be used to help you protect them. This is a delicate discussion, and needs to be handled with care. Many elders are worried about a loss of autonomy, or feeling that they are in some way dependent on someone else. This is understandable. But the fact remains that we reach the peak of our cognitive skills at age 53, and as we age we simply don’t have the tools to manage as well as when we were younger. Compounding the problem is that elders actually feel just as confident in their decisionmaking skills at the same time they are actually losing those skills.
You can save elders worry, grief, feeling isolated, or even the prospect of poverty. It’s sad but true that both related people/trusted people and financial advisors can be the most helpful, and also warrant the most scrutiny against abusive behavior. Only people who care enough to get involved, and risk ruffling some feathers, can actually help the elderly.

John Kageleiry is a business writer and financial planner. Have a question for “Finance 101”? Email it to jkageleiry1@gmail.com.