Here on the AgingOptions blog, we felt it was time for an update on the topic of financial scams targeting seniors. Are the new rules and regulations at the state and federal level that have been adopted over the past few years having any effect? The answer appears to be yes, there’s some evidence that a few scams have been detected in time, but families still have to be on guard. Financial scams targeting seniors remains a multi-billion dollar “industry.”
Financial Scams Cost Seniors Tens of Billions Each Year, but Go Unreported
Just how big is the problem? When it comes to estimating actual dollar losses, there seems to be a wide divergence of opinion. According to this recent Kiplinger article, which prompted our scam report, “one in five older Americans falls prey to financial exploitation each year. Victims lose $3 billion annually.” (Those figures supposedly came from AARP studies.) But most sources we reviewed pegged the actual number at more than ten times that amount. In 2018, this Bloomberg article quoted a financial services firm that projected losses by seniors of $36.5 billion a year, adding that even that figure is probably “grossly underestimated.” That’s because a huge number of fraud cases are never reported. (One New York State study estimated that the incidence of reported fraud victimizing seniors could be as low as two percent.)
There are many reasons why so few of the estimated 5 million older Americans who are financially exploited every year ever report their loss. One is embarrassment: either the seniors or their family members don’t want to admit that the loss took place. Sometimes the victim has some degree of cognitive decline and is unaware of the scam until it’s too late. But one of the biggest reasons may be closer to home. “The dirty little secret about elder exploitation is that almost 60 percent of cases involve a perpetrator who is a family member,” the Bloomberg article reports. “The elderly are suffering at the hands of greedy, desperate or drug addicted relatives and friends, among others.” What’s more, “The total number of victims is increasing as baby boomers retire and their ability to manage trillions of dollars in personal assets diminishes.”
New Regs Empower Banks, Advisers to Thwart Financial Scams
There is some progress on the regulatory front, Kiplinger reports. “Congress, state regulators and lawmakers, and the financial services industry have approved new laws and rules recently to help safeguard seniors and their assets, based on the idea that financial institutions and professionals are on the front lines of spotting elder financial abuse. The changes are meant to protect seniors and to shield financial professionals from liability for reporting exploitation.” In the past, banks and other financial advisers were hesitant to contact law enforcement or adult protective services to report suspected violations because they feared running afoul of privacy laws. New rules are designed to make reporting easier and safer.
One example on the federal level, says Kiplinger, is the Senior Safe Act, passed by Congress in 2018 and signed into law by President Trump. This statute protects financial services professionals who report suspicious activity from being sued over privacy violations, so long as they have undergone appropriate training. “The law encourages banks, credit unions, investment advisers, broker-dealers, and insurance companies and agents to provide the proper training for employees by giving the firms and employees legal protections in return,” the article explains. Another new Trump-era regulation, the Elder Justice Prevention and Prosecution Act, improves coordination among federal, state and local agencies and creates a new high-level Department of Justice position, the “elder justice coordinator,” recently filled by career prosecutor Antoinette Bacon.
Combating Financial Scams with Trusted Contacts, Temporary Holds
There is also action being taken within the financial industry to protect seniors. This article from early 2018 on the website of FINRA (the Financial Industry Regulatory Authority) details the first-ever uniform national standards that have been put in place to protect senior investors. “Firms are now required to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account,” says FINRA. “In addition, the rule permits FINRA member firms to place a temporary hold on a disbursement of funds or securities when there is a reasonable belief of financial exploitation, and to notify the trusted contact of the temporary hold.”
The Kiplinger article explains the practical impact of these new rules. “In the future, if a bank teller notices an elderly customer confused about withdrawing money or making puzzling transactions, the teller could flag that behavior to a superior, who could contact authorities, if necessary.” Also, says the report, “The next time you meet with your financial adviser, you may be asked to supply a trusted point of contact, which is a relative or friend to call if the adviser has a reasonable belief that you might be a victim of financial exploitation.” Because it can be so hard to recover funds once the cash leaves an account, “Your adviser also could put a temporary hold on a suspicious disbursement request from you, so your money is safeguarded until the concern is investigated.” These all seem like helpful, positive developments to us.
Minimize the Risk of Financial Scams Through Effective Planning
Financial scam artists are clever, and there appears to be a new scheme concocted almost every week. One of the best safeguards against scams is the active involvement of trusted family members in a senior’s affairs as they age – and the best way to ensure that those affairs are fully in order is with a comprehensive retirement plan. At AgingOptions we call our planning approach “LifePlanning,” because it truly covers every major facet of life as we grow older. LifePlanning includes finances, of course, but it also helps you build a protective legal framework that is appropriate to your circumstances and the size of your estate. A LifePlan helps you prepare for both short-term and long-term medical costs, since unplanned medical expenses can be devastating to seniors. It also includes a housing strategy that guides you as you prepare for the stages of life that lie ahead in retirement. As you can see, there’s no other retirement planning strategy that matches the scope and power of an AgingOptions LifePlan.
We encourage you accept Rajiv Nagaich’s invitation to join him at an upcoming LifePlanning Seminar. These free, information-packed events are the perfect way for you to get important retirement-related questions answered – even questions you ever knew you needed to ask. For a complete calendar of upcoming seminars, visit our Live Events page and sign up for the event of your choice. We know you’ll be very, very glad you did. Until then, age on!
(originally reported at www.kiplinger.com)