There’s no way to guarantee your aging parents won’t fall victim to elder financial abuse, but there is one thing you can do to help cut the odds: Be sure they’re discussing their finances with someone they (and you) can trust.
That’s the upshot of the recent Allianz Life study, Safeguarding Our Seniors. When surveying 1,223 people who were 65 and older, Allianz found that only 8 percent of those who said they were victims of elder abuse also said they were “currently discussing their finances with another person.”
The Need to Talk About Money
And those who talk to “third-party resources” about their finances felt better equipped to identify and prevent elder financial abuse than those who don’t: 84 percent who regularly talk with friends and family about their finances and 82 percent who speak with hired money pros were confident about protecting themselves vs. 70 percent who do neither.
While 93 to 94 percent of survey respondents who talk about their finances with a hired professional or friends and family said they never sign documents they don’t completely understand, only 82 percent who handle their money alone said that.
Allianz Life President and CEO Walter White (yes, he has the same name as Breaking Bad’s fiend) told me he was somewhat surprised how few people 65+ are discussing their finances with anyone who could help them avoid becoming elder abuse victims — family members, friends or financial advisers. Only 24 percent are doing so regularly.
Allianz estimated that elder fraud victims have lost an average of $30,000 and more than 10 percent lost $100,000 or more.
“It’s one of the differences between Americans and Europeans,” said White. “In Europe, they won’t talk about their health but will talk about their finances. Here, it’s the opposite.”
One possible cause of elder abuse: senior loneliness. “One reason older people are vulnerable is they don’t have as much social contact as younger people,” said White. So when someone reaches out in what seems like a friendly way, the recipient can subsequently let down his or her guard and let a con artist gain financial access.
Frank discussions about money are especially important as we age, White noted. “Our financial decision-making capabilities start to diminish,” he said. White discovered this firsthand. He told me his mother had been “meticulous with the family finances, almost to the point of it being too much — she kept every record.” But as his mother grew older, “her abilities started to diminish. Bills went unpaid and she couldn’t recall where all her investments were.”
Huge Potential for Abuse
And because an elderly person’s finances can be quite complex, this is an area with great potential for abuse, said White.
We’re not talking pennies, either. In an earlier study, Allianz estimated that elder fraud victims have lost an average of $30,000 and more than 10 percent lost $100,000 or more.
Kathleen Quinn, Executive Director of the National Adult Protective Services Association recently told a Senate Special Committee on Aging hearing that elder financial abuse is “rampant, largely invisible, expensive and lethal.” The 2010 Investor Protection Trust Elder Fraud Survey estimated that one in five Americans over 65 has been victimized by a financial fraud. MetLife has said that financial exploitation costs seniors at least $2.9 billion annually.
Sadly, as I recently learned during my interview with T.S. Laham, author of the new book, The Con Game: A Failure of Trust, sometimes family members are culprits, stealing from relatives. Quinn told the Senate that 90 percent of reported elder financial abuse cases involve a family member.
What You Should Do
That’s why White recommends bringing in more than one trusted family member, as well as a money pro such as an financial adviser, accountant or an attorney.
One adult child could, for instance, take responsibility each month for reviewing a parent’s checkbook and credit card statements. Another could meet quarterly with the parent and his or her financial adviser and annually with the tax preparer.
Join the Aging-Summit Webcast
I’m glad that the upcoming, once-a-decade White House Conference on Aging has chosen Elder Justice to be one of its four key topics. (If you can, join the online and webcast Intergenerational Summit on Aging Wednesday May 28 from 9:30 am EDT to 3:30 pm, which will tee up the White House’s conference. I’ll be leading one of the discussions and my Next Avenue colleague, Emily Gurnon, will lead another.)
I’m also heartened to see that FINRA — the financial services industry’s self-regulatory group — just launched a toll-free Securities Helpline for Seniors (844-574-3577, staffed weekdays), to provide older investors with a supportive place for assistance about concerns they have with their brokerage accounts and investments.
A Problem That Will Only Grow
And it’s good to see, as Financial Planning’s Miriam Rozen just wrote, that more states are passing laws to protect their elderly residents and that the Securities and Exchange Commission’s first Office of the Investor Advocate is making elder abuse a priority.
“Everyone realizes that elder abuse is a problem that will only grow, due to demographics and technology that didn’t exist in the past,” said White.
Financial services firms and their advisers play an important role in curbing and spotting elder abuse, as the First Clearing Correspondent Services white paper, A Wake-Up Call for Financial Advisors: Creating Value for Elder Clients just laid out.
Said White: “I think we can do more.”