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By Al Chingren - June 19, 2018
As the American population ages, older generations have become a target for financial exploitation. Senior Americans lose more than $30 million every year to financial abuse. More than half of that amount may come from legal (but deceptive) practices designed to prey on vulnerable adults.1
Source: National Adult Protective Services Association
Elder financial abuse involves the fraudulent, misleading or illegal actions by a caregiver, family member, fiduciary or other individual for personal gain, depriving the victim of the benefits or assets they are entitled to.
Financial abuse can take many forms. An individual may be pressured by a friend or family member to make uncharacteristic financial decisions.
A trusted acquaintance could gain access to accounts and funnel assets away for their own gain. A phone or online scammer could convince the individual to pay for fraudulent services or investment schemes.
Anyone can fall victim to a swindler's tactics; financial abuse crosses all social, educational and economic boundaries. However, seniors' regular income and accumulated assets put them at greater risk for financial exploitation. Social isolation, cognitive decline and grief (due to a recent loss of a spouse or other loved one) are also risk factors.
It's not always easy to tell if an individual is simply being financially generous or is being exploited. It may be an overall pattern of behavior versus a single act, but here are some general warning signs:
The uptick in abuse has not gone unnoticed by financial industry regulators. Earlier this year, the Financial Industry Regulatory Authority (FINRA) issued guidelines for brokers, bankers and advisors to recognize and report potential financial abuse specifically against seniors.
Here's how FINRA's new rules are designed to protect investors:
Brokers are now required to ask investors for a designated, trusted contact person for their investment accounts. The broker must make reasonable efforts to obtain the contact information, which acts as an additional reference point when monitoring transactions and keeping accounts safe.
Firms can now put a temporary hold on withdrawals from investment accounts if they suspect fraud or exploitation. According to FINRA, this rule applies to "investors age 65 and older" or to "those with mental or physical impairments that the firm reasonably believes makes it difficult for them to protect their own financial interests."
For questions or concerns about investment accounts, seniors can call the FINRA Securities Helpline for Seniors at 844-57-HELPS (1-844-574-3577). Other resources include:
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1 The True Link Report on Elder Financial Abuse 2015, True Link Financial.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.