According to recent reports, elder financial abuse is on the rise, costing elderly Americans an estimated $36.5 billion in 2020 alone, according to statistics gathered by the National Council on Aging. Some estimates indicate that about one in three older Americans has been cheated in the past five years. An official at the Institute on Aging calls it “an elder financial abuse epidemic.” Sadly, only about one in 44 elder abuse cases are ever reported. This may account for why the victimizers believe that stealing from older Americans is a low-risk crime. The problem has become so severe that on June 14, 2021, President Biden, in concert with the United Nations, proclaimed “World Elder Abuse Awareness Day.”
Apparently, there is no shortage of schemes to dupe those in the early stages of dementia into parting with their money, ranging from investment scams victimizing people with marginal retirement assets who want to boost their income to website offers that result in the victim downloading a virus that allows hackers to harvest personal information. Fraudulent telemarketing calls are another frequent tactic. These can include solicitations for nonexistent charities or a frantic phone call saying that a friend or family member is stranded and needs money wired to them.
Other schemes involve shysters convincing someone that they’ve won a major sweepstakes contest; all they have to do is pay duties and taxes in order to get the payout. Several thousand dollars later, the scammers have gone silent, and of course, the supposed “winner” never receives any money. In other cases, a scammer may obtain seniors’ personal information, forge their names, and open fraudulent bank accounts, draining away retirement dollars until there is nothing left.
In a financial service situation, a broker might suddenly appear in the picture and start high-commission trading in unsuitable investments or talk the victim into taking out a loan on their home in order to increase the amount of commissions that could be generated. (This, of course, is called churning, and it is not always clear when legitimate trading crosses the line, especially if the broker has gotten the customer to sign a document they don’t understand.)
Many times, shamefully, the abuse is an inside job; a caretaker or new ‘friend’ will appear on the scene and convince a retiree to give them power of attorney control over the finances, change their will in the scammer’s favor, or “help them out” with increasing payment amounts. In a recent well-publicized case, the grandchildren of a wealthy widow became stockbrokers, took discretionary control of their grandmother’s investment account, and began churning it to turn her money into their commissions. The grandmother had to go to court to get back control of her own (diminished) finances.
The red flags are easy to describe but not always easy to spot when they are occurring: unusually frequent or unexplained withdrawals from a retiree’s bank account; ATM withdrawals by someone who has never used an ATM card; new “best friends” accompanying an older person to the bank; suspicious signatures or outright forgery on checks; bank statements that no longer go to the customer’s home; a caretaker, relative, or friend who suddenly begins conducting financial transactions on behalf of an older person without proper documentation; and altered wills and trusts.
The American Bankers Association offers some basic tips that might help retirees protect themselves:
- never pay a fee or taxes to collect sweepstakes or lottery “winnings”;
- never rush into a financial decision; instead, ask for details in writing and get a second opinion;
- pay bills with checks and credit cards instead of cash, to keep a paper trail;
- if something doesn’t feel right, back off—feel free to say no; after all, it’s your money.
If relatives or friends notice any of the warning signs, they should immediately investigate. For assistance, they should contact Adult Protective Services in their town or state. And they should report all instances of elder financial abuse to the local police.
The bottom line here is that there are many people who can’t be trusted with an older person’s finances. Perhaps the best protection is to find a son or daughter who unequivocally has the retiree’s best interests at heart. In the professional world, attorneys and financial planners or investment advisors registered with the Securities and Exchange Commission are required to adhere to a fiduciary standard, which means putting the interests of the person they’re advising ahead of their own interests at all times.
Mathis Wealth Management is a fiduciary financial advisor, required by professional and ethical standards to place the client’s best interest first in all cases. Learn more about how we work.