Elder Financial Abuse
Often, financial advisers are the frontline workers when it comes to preventing, identifying and reporting elder financial abuse or exploitation.
“Financial advisers can often see the symptoms of abuse before anyone else, and they can also help identify cognitive decline, even before family members,” says Ryan Bertrand, vice president and managing director of advanced markets at Transamerica. “While [clients] might avoid certain situations in their everyday lives, there are necessary conversations they have with a financial adviser that can expose cognitive impairment.”
Taking Action
Registered investment advisers (RIAs) who believe a client is being exploited or scammed have an ethical obligation to act, and are legally required to in most states. Generally, action begins with a phone call to their firm’s compliance or legal department for guidance on next steps, Bertrand says. “Compliance departments usually have a prescribed list of what should occur when dealing with clients in this situation.”
Often, just a phone call or conversation with the client, a family member whom the adviser knows, or a trusted contact can clear up the matter, he says. Failing these, advisers may need to contact their state’s adult protective services program or law enforcement.
Sometimes, advisers may need to delay carrying out a client’s request while confirmation, or an investigation, occurs. Based on the circumstances, the Financial Industry Regulatory Authority (FINRA) allows advisers to put a temporary hold on a client’s account if they believe the person is being exploited.
“Time is the enemy of the thief,” says Judith Kozlowski, a senior fellow at the Women’s Institute for a Secure Retirement and an expert with the Department of Justice Elder Initiative. “The longer the financial institution can prolong the actual money from leaving the account or the securities from being transferred, the better it is for the person being exploited.”
Preventing Potential Problems
Advisers can also take steps to keep clients from being victimized.
“Advisers should preplan for a crisis,” says Liz Loewy, co-founder and chief operating officer (COO) at EverSafe, a financial wellness platform for seniors and caregivers. “Cognitive issues can happen almost overnight, and advisers need to be looking at ways to be holistic and get in front of these problems.”
Internally, that requires training advisers on signs of financial exploitation and the established procedure to follow if they suspect it. Sources point out that, if advisers have received the training from a financial institution, they have immunity under the Senior Safe Act when reporting suspected financial abuse of clients.
In relationships with clients, prevention begins with making sure all have at least one “trusted contact” on file, experts note. FINRA began requiring advisers to obtain such information from clients opening new accounts, starting in 2017. Advisers should consider asking clients who signed on before that to add one to their file.
Further, it can help to build relationships directly with contacts or with others in clients’ families, experts say. If an issue arises, the adviser can call the contact to discuss and resolve it as quickly as possible. Alternatively, advisers may suggest that family members receive read-only copies of financial statements, letting them see activity but not initiate transactions.
Advisers can educate their clients, and themselves, on the dangers of elder financial abuse, including common scams and warning signs that they might be a victim, sources say. Making sure clients have a solid estate plan—and referring them to an estate planning lawyer if not—can also thwart scammers.
“Advisers should be diligent about guiding their clients to get their documents, wills and powers of attorney in order,” Kozlowski says. “Even if it’s just going through a checklist in their annual meetings.