One of the things I enjoy about writing this weekly blog is that the subject matter can ebb and flow over time and doesn’t have to follow any particular pattern (or, at least I don’t think so…). This week is a perfect example. I was set to write about recent market volatility, the yield curve and evolving expectations. But then I had a “driveway moment” while listening to Marketplace on KQED. The topic dovetails with our brief discussion last week about brain health and other posts I’ve written regarding elder financial abuse, so I wanted to continue the conversation.
Called “Brains and Losses”, the short series from the folks at Marketplace tackles the complicated issues associated with financial fraud perpetrated against seniors. The series also looks at some of the causes and what to do about them. We all probably know, or at least know of, a senior who has been a fraud victim. Sometimes we equate the loss to their simply being too old to manage their own finances or even the onset of dementia, but it’s more complicated than that. Interestingly, doctors studying seniors who are otherwise physically and mentally healthy are finding that some are still at heightened risk for financial abuse.
According to Marketplace there’s a new term for this: “age-associated financial vulnerability”, or the decreasing ability to detect fraudulent activity as folks age, even without other symptoms of cognitive decline. One researcher showed how the brains of scam victims and others who had fended off scammers were physically different. The differences appeared in the area of the brain thought to control our intuition, or what one researcher referred to as our “spidey sense”. If true, this would make it that much harder for folks to avoid well-honed fraudulent schemes. Lack of other symptoms would also make it harder for loved ones to tell when there might be a problem.
While researchers find that nearly 60% of financial abusers are family members or trusted caregivers, a growing number of scams are perpetrated by unknown people via email or phone. Researchers also found that, sadly, many seniors initially participate out of loneliness. Since these crooks are often professionals, they know the right buttons to push to keep seniors responding to emails or picking up the phone. And unfortunately, once someone falls prey to one of these scams, or even simply answers when the phone rings, they’re put on lists that are then sold to other fraudsters, often leading to an uptick in attempts. It’s a horrible situation that usually plays out in private. If you listen to the Marketplace information (link below), you’ll hear some of these stories. They should make you cringe and probably feel a little angry too.
There are numerous implications and questions here, and none have good answers. For example, if fraud victims feel embarrassed by their predicament, or are perhaps suffering from cognitive decline, will they ask for help before they’ve lost their savings? Who will they ask, assuming it’s a family member or caregiver who’s causing the problem? Should safeguards be put into place in advance to protect someone from themselves? Even if someone knows to appoint a trusted person or a professional third party to handle their financial affairs, will they be willing to actually do it? Additionally, for third parties who may be involved somewhere along the chain, such as your humble financial planner, how should they proceed given rules (written and otherwise) about privacy?
Last year Congress passed The Senior Safe Act urging brokerage firms to train staff on how to spot potential financial abuse of seniors. Unfortunately, the Act only proposed guidelines and focused primarily on providing firms with immunity when sounding the alarm to regulators (not to friends and family members). Firms can also put a hold on requested transactions, like a wire to a suspicious third party, for up to a month. Is that long enough? Those who have been though the process of having the courts appoint a trustee for someone know the process takes months and costs thousands. Who is supposed to help in the meantime?
Brokerage firms also now ask for a “trusted contact” when opening accounts, someone to call if concerns arise. Ideally, this person would be someone who isn’t a potential abuser themselves. It could be a spouse, a trusted friend or family member, or even a CPA or attorney. It could also be one of the growing (but still very small) ranks of private fiduciaries who are regulated by the state. Ultimately, this trusted contact wouldn’t have any legal authority to act on behalf of the senior but could start notifying family and even the authorities of potential wrongdoing.
So, takeaways here are that you could suffer from a fraudulent financial scheme even if you’re otherwise mentally healthy. The crooks are that good and, if the research is correct, your intuition in this area could decline as you age. Understanding this, it’s prudent to think long and hard about who you want as your trusted contact and who you’d like to manage your own financial affairs if needed. Ideally, you’ll make these decisions ahead of time and then have the intestinal fortitude to actually follow through when the time comes.
Here’s a link to the “Brains and Losses” series:
Have questions? Ask me. I can help.
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