While elder financial abuse is undoubtedly still a major problem — $3 billion stolen annually, by one estimate — older Americans are a little less likely to be victimized than in 2010, according to a new survey from the Investor Protection Trust (IPT), a nonprofit devoted to investor education.
More good news on the elder fraud front, especially if you have parents in their 70s, 80s or 90s: there are now a bunch of efforts underway to prevent these scams and aid victims. Federal and state government regulators are pitching in. So are AARP, IPT and some financial services firms. “Many times, the financial adviser is the first person to notice a problem,” said Cynthia Hutchins, director of gerontology at Bank of America Merrill Lynch.
Rampant, Expensive and Lethal
Older consumers will likely be especially glad that some banks are taking seriously elder financial abuse, a category of crime Kathleen Quinn, executive director of the National Adult Protective Services Association, has called “rampant, largely invisible, expensive and lethal.” A recent survey for the AARP BankSafe campaign found that 81 percent of bank customers 50 and older prefer to establish their accounts at banks that protect them from exploitation or provide an age-friendly service.
IPT President and CEO Don Blandin said fewer older adults are becoming victims partly because scammers are getting 'more sophisticated about who they target.'
As for the “good” news in the IPT survey: Although the poll found that 17 percent of Americans age 65 and older have “been taken advantage of financially in terms of an inappropriate investment, unreasonably high fees for financial services, or outright fraud,” that’s down from 20 percent in 2010.
This is not a huge drop, but it’s a drop, nevertheless. (The 2016 survey, conducted by Public Policy Polling, interviewed 2,257 Americans 65 and older and 703 adults with parents 65 and older.)
Why Fewer Are Becoming Victims
IPT President and CEO Don Blandin said fewer older adults are becoming victims partly because scammers are getting “more sophisticated about who they target.” They’re taking a rifle approach, going where the big money is, rather than taking a shotgun approach and hoping to score random hits. As Consumer Financial Protection Bureau (CFPB) Director Richard Cordray said last week: “Older Americans make attractive targets for financial exploitation because many have accumulated some wealth in the form of retirement savings or home equity. They can be isolated and lonely, and some may have impaired physical or mental capacity that makes them especially vulnerable.”
IPT’s survey also pleasantly discovered that the percentage of older Americans exhibiting one or more of the warning signs of financial victimization fell from 50 percent in 2010 to 43 percent in 2016. The reason for the drop, said Public Policy Polling’s Jim Williams, is that just 5 percent now said they didn’t feel confident making big financial decisions alone, down from 16 percent in 2010. “There could be more of a support network and more vigilance out there,” said Williams.
And in what IPT calls a “major improvement,” 51 percent of people 65 and older correctly answered all the poll’s investment questions; in 2010, just 44 percent did.
However, 21 percent of the adult children surveyed said they think their parents would be ashamed to tell them if they thought they were being swindled and would hide this from them. Worse, 47 percent of the adult children think it’s not likely that they could figure out if their parent had been swindled if the parent didn’t disclose it; that’s up from 35 percent in 2010. So not everything is rosy on the elder fraud front.
How Doctors Are Helping
The IPT survey finding that surprised me most: A full 21 percent of the adult children said their parents’ health care providers mentioned concerns about how the parents were handling money; this was up sharply from just 5 percent in 2010.
Blandin gives some credit to IPT’s Elder Investment Fraud and Financial Exploitation (EIFFE) Prevention Program, encouraging doctors to spot and report signs of mild cognitive impairment (MCI), which can make older people more vulnerable to money swindles. More than 8,600 medical professionals have been trained and some physicians keep IPT’s “pocket guide” handy to help them ask key questions. “My doctor now has something on his intake form to see if patients have any financial issues,” said Blandin.
One problem: The IPT survey also found that 61 percent of adult children are not in touch with their parents’ health care providers.
Alphabet Soup Elder Fraud Initiatives
Blandin believes “we really need to get a lot of sentinels in place to watch what’s going on.” Fortunately, there’s now an entire alphabet of governmental initiatives to curb elder financial abuse:
CFPB Last week, this federal agency released recommendations to help financial institutions “prevent, recognize, report and respond to financial abuse.” Said CFPB’s Cordray: They “are in a unique position to detect when an elder account holder has been targeted or victimized. And when they do identify problems, they are in a position to do something about it.”
The CFPB thinks financial institutions should train everyone (from top management to frontline staff) to prevent, detect and respond to abuse; use fraud detection technologies to help spot warning signs; work closely with Adult Protective Services and law enforcement and offer more age-friendly services to enhance protections, such as account activity alerts.
The CFPB also has tips for consumers on how to work with their financial institutions to protect themselves from financial abuse.
FINRA (the financial services industry’s self-regulatory group) Last April, FINRA launched a toll-free Securities Helpline for Seniors (844-574-3577), which has answered more than 2,500 calls (mostly from Florida, California and New York, according to ThinkAdvisor), recovered about $759,000 and identified the latest scams.
FINRA also recently proposed a rule letting brokers place a temporary hold on disbursing funds from an elderly customer’s account if there was a reasonable belief the person was being financially exploited.
NASAA (the states’ securities regulatory agency, the North American Securities Administrators Association) Its Serveourseniors.org site lets users find their securities regulator, Adult Protective Services agency and other governmental senior-related services.
NASAA’s new president, Judith Shaw, told ThinkAdvisor that “working together we can and will close the holes in our safety net of support and protection for vulnerable adult investors.”
One possible way: NASAA’s proposal that’s similar to FINRA’s, but even more emphatic: it would require brokers and investment advisers notify Adult Protective Services and their state securities regulator when they believe financial exploitation has occurred. NASAA would also let brokers or advisers delay fund disbursements if they suspect financial exploitation.
SEC (The U.S. Securities and Exchange Commission) This agency’s first Office of the Investor Advocate is making elder abuse a priority. The SEC has also been urged by the Senate Special Committee on Aging to manage the creation of a clearinghouse database showing whether financial professionals are legit and licensed.
One governmental snag: Although Congress in 2010 authorized $125 million to fight elder financial abuse — partly by boosting funding of Adult Protective Services agencies — SEC Investor Advocate Rick Fleming has said “the first actual appropriation came in 2015 and amounted to $4 million.”
AARP and the Banks
In addition, AARP and some financial firms are leading the charge in the private sector.
The BankSafe Initiative of AARP, the goliath representing Americans 50+, aims to prevent financial exploitation of older bank customers and empower financial caregivers among other things.
Increasingly, banks, credit unions and other financial institutions are taking steps to spot potential elder fraud abuses and to take action when scammers have done their dirty work. “Most big banks now have an elder fraud initiative,” said Elizabeth Loewy, general counsel and senior VP at EverSafe, an elder fraud monitoring service ($7.49 a month to $22.99 a month) that scans financial accounts and credit reports for suspicious activity and identity theft and alerts customers and their families accordingly.
Wells Fargo Advisors, for instance, makes its training on exploitation mandatory for all employees. According to an AARP BankSafe report, Wells Fargo Advisors also has developed an Elder Strategy Group whose goal is to have centralized reporting and lawyers whom financial advisers can contact with suspicions of elder financial abuse.
As Next Avenue noted in December 2015, Citibank has also been a leader among the top 10 largest retail banks in actively monitoring the activities of elderly customers for potential fraud. And the National Council on Aging gave high marks to the work by credit unions to keep older customers safe.
Fidelity is giving a discount on EverSafe to some of its financial adviser clients. Speaking at the What’s Next Boomer Business Summit I attended in Washington, D.C., last week, Suzanne Schmitt, Fidelity’s vice president of family engagement, said: “The biggest issue isn’t getting a conversation going about your parents’ investments, but understanding what does Mom and Dad’s daily spending look like.”
In a media briefing at the American Society on Aging’s Aging in America conference I also attended in Washington, D.C., last week, Bank of America Merrill Lynch’s Hutchins said: “We have a form so clients can give us the name and contact info of a person they trust. Then, if a financial adviser notices a change in behavior over time, we have the ability to call that person and gives them a heads-up. It’s not a mandatory form, but it’s encouraged.”
And the American Bankers Association’s new Safe Banking for Seniors program aims to get bankers to educate older Americans and their caregivers about elder financial abuse.
At the What’s Next Boomer Business Summit, Loewy said: “This is not just a senior problem. It’s an aging boomer problem and a problem for their families. It takes a family and trusted caregivers to address this. Seniors are good at saving an awful lot of wealth. Criminals follow the money.”