As the American population ages, older generations have become a target for financial exploitation. Because these crimes are often under reported, we may never know how much money is lost. Financial institutions reported $1.7 billion in suspicious activities in 2017, and actual losses each year could range from $3 billion to 36 billion.¹
What Is Financial Abuse?
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.
Know the Warning Signs
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:
Confusion about financial situation
A change in or unwillingness to discuss finances or estate plan
Unpaid bills or collection notices
Unusual withdrawals or payments, particularly larger amounts
Opening or closing accounts suddenly
Expected checks are missing or never deposited
New or renewed relationships that are influencing financial decisions
Financial Regulators Are Stepping Up
The uptick in abuse has not gone unnoticed by financial industry regulators. 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:
Choice of a Trusted Contact
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.
Holds on Withdrawals When Financial Exploitation Is Suspected
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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Source: National Adult Protective Services Association
Consumer Financial Protection Bureau, Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends, February 2019.
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.