When a financial advisor at RBC Wealth Management noticed a series of suspicious transactions occurring in an account of one of his senior clients, he immediately shared his concerns with his supervisor and his compliance officer. From what they could tell, the client’s caregiver was somehow involved, and it appeared the client had no knowledge of what was going on. When the financial advisor approached the client with his concerns, the client was apprehensive about challenging his caregiver – his sole supporter – with accusations about where the money was going.
“He lived in a rural area where he was miles from town and this (caregiver) was his only lifeline,” says Jennifer McGarry, head of Risk Management Initiatives at RBC Wealth Management-U.S. in Minneapolis. Sadly, the situation isn’t unique, says McGarry. “Some clients would rather give the benefit of the doubt, allowing unauthorized payments from their account in order to avoid confrontation and continue the services that (their) caregivers are providing. It’s very sad.”
This client’s experience is one of many cases of financial exploitation that are eroding the wealth and retirement assets of vulnerable seniors across the United States – and costing older Americans approximately $3 billion a year, according to the U.S. Senate’s Special Committee on Aging.. One in nine people aged 60 and older has reported being abused, neglected or exploited within the last year, according to the National Adult Protective Services Association (NAPSA). And with seniors isolated at home more than ever before to protect themselves from the COVID-19 pandemic, they are even more vulnerable to financial exploitation.
The magnitude of the problem has helped spur lawmakers and industry regulators to establish stronger initiatives geared toward stamping out the exploitation of vulnerable seniors. New laws and financial industry regulations are encouraging financial services firms to take proactive steps like asking clients to identify trusted contacts and allowing firms to temporarily delay disbursements when financial exploitation is suspected to provide time to intervene.
While these are positive steps toward addressing the issue, more work is required in order to effectively combat this issue of financial abuse. With a large number of these instances going unreported, fighting financial fraud that targets an aging, vulnerable population requires vigilance on everybody’s part. Here’s how you can help protect yourself and your loved ones from financial exploitation.
Watch for the warning signs of financial abuse
As the aging demographic transitions to a point where assistance and support becomes more pertinent, it’s crucial to protect their personal wealth. “It’s very important that we look out for potential red flags, fraud, or people taking advantage of an aging person’s situation or vulnerability,” says McGarry.
Perhaps the biggest red flag is the introduction of a new relationship, be it romantic, a simple friendship or even a different caregiver, who has gained control or some sort of influence in an older person’s finances. The relationship could be completely innocent, but it’s always worth questioning.
Other warning signs of financial exploitation include: an increased number of checks written out to the same person or entity, a high frequency of small amount withdrawals, confusion about where funds are kept, changing power of attorney or beneficiaries on insurance or investment accounts, unnecessary or expensive home repairs, an out-of-place or unusual urgency to make an investment or transaction, and bounced checks – despite the fact there should be enough funds in the account.
With the increasing likelihood of financial exploitation, many financial institutions have added new measures to prevent such abuse. Firms generally require written consent from clients in order to allow a caregiver to take an active role in helping them manage and disburse their wealth. Additionally, the securities industry now requires financial advisors to ask all clients for a trusted contact person, a rule designed to help protect the growing number of vulnerable people as the population ages.
Know the scams so you can avoid them
Having a fundamental knowledge of the current techniques used by fraudsters is important in the fight against financial abuse. For example, with the proliferation of digital communication, scam artists have learned to impersonate an individual’s friends and family online.
Fraudsters may email the person in question and pose as a grandson or granddaughter, saying they are in a bad situation while on a trip or at college, and in need of emergency funds.
“Well-intentioned clients often succumb to those pleas for help from what they believe to be their family members,” says McGarry. “Such clients may not be monitoring their accounts and emails as often as we would like, so that they could promptly identify when something is peculiar.” That’s where vigilant tracking of your bank accounts and knowledge of loved ones’ email addresses and habits becomes important. One way to tell if your family member is truly in need of assistance is to contact the family member directly. Whether they’ve sent an email or called, verify the situation by calling your loved one at their phone number you’re familiar with.
Other popular scams include claims that you’ve won a lottery in another country, or that you owe the Internal Revenue Service and need to send money to settle your accounts. Scam artists may also appeal to your investing side, using high-pressure sales tactics to push you into throwing your wealth behind a so-called “once in a lifetime, risk-free” investment. The pitch may be for a high-tech startup you haven’t heard of, or a bogus charity offering relief following a recent disaster.
It’s important to be aware that fraudsters use increasingly sophisticated techniques to create the appearance of validity. “A variety of these scammers have contraptions on their phones to give the caller ID display more apparent legitimacy,” warns McGarry.
Protect yourself by being proactive about your investments
The key to protecting yourself and your loved ones is to be proactive. “We encourage our financial advisors to start talking with clients very early on about their plans for the future, who they would like to name as their trusted contact, and who to involve in the event that they are no longer able to care for or manage their finances independently,” says McGarry.
As you enter the early stages of retirement, sit down with your family and your financial advisor to discuss your goals, and how you want to use your assets as you age. If there are any philanthropic causes you’re interested in supporting, put your wishes in writing.
If you haven’t already, use this opportunity to establish any trusts, develop a will, and choose a power of attorney to manage your estate in the event you’re incapacitated. These resources will be your team, and they’ll be critical going forward – especially if you encounter some of the nefarious tactics used to prey on the aging population.
But it’s not just about being wary of fraudsters. The vast majority – 90 percent, according to NAPSA – of reported financial abuse is committed by the older victim’s own family.
Fighting financial exploitation is everybody’s business
If you’re worried you or your loved one has been financially exploited, speak with your financial advisor immediately and tell the authorities. “Financial exploitation is a crime,” says McGarry. “Like any other financial crime, people in the U.S. have an obligation to report it.”
Be vigilant, check your banking and credit card statements frequently, and watch for strange purchases or withdrawals. Don’t invest in a high-pressure sales tactic that seems “too good to be true,” and check the legitimacy of charities before donating to them. Regularly review your financial plan with your investment advisors to keep everything up to date and aligned with your wishes.
And while regular communication and social interaction goes a long way in preventing fraud, having a support network in place is the best way to see that you, or your loved ones, are well looked after as you age. “You need to prepare for the day when you’re not capable of managing your affairs independently,” adds McGarry.
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.