How to Prevent Senior Financial Abuse
By Kyle Innes
In July, police in Orange County, N.Y., arrested Perry Coniglio, 43, for reportedly holding 81-year-old David McLellan as a virtual prisoner at a small motel for six years. Officials say Coniglio regularly abused and withheld food from McLellan, who suffers from dementia, while stealing the elder man’s Social Security and pension benefits.
The case received national media attention, and while McClellan’s alleged imprisonment depicts a particularly extreme and nightmarish scenario, it underscores how seniors can be vulnerable to financial abuse of all kinds.
Glance through the news pages in your own community and you’re likely to find similar, if less dramatic, stories about elder victims. It’s now commonplace to see reports of, say, a senior who loses her savings when she falls for a telephone scam, or a lonely elderly man whose new “girlfriend” defrauds him of tens of thousands of dollars.
It’s a large and growing problem, particularly as the population of 65 and over Americans continues to increase.
Moreover, seniors can be ripe targets for exploitation since many have significant retirement assets from a lifetime of saving and investing. It’s estimated that the population of Americans 65 and over holds more than three-quarters of financial assets in the United States.
By one estimate, victimized seniors lose at least $2.9 billion per year in cases of financial abuse reported by newspapers and other media outlets — and the true figure is much higher, if hard to estimate due to underreporting.
Which leads to the question: what can be done to combat this pernicious form of exploitation?
Eyes and ears: Family and community responses to elder financial abuse
There’s no simple solution to elder financial abuse, and protecting vulnerable seniors is a joint effort.
First, recognize that friends, family and neighbors are the front-line first responders when it comes to preventing elder financial abuse. And prevention begins with clear communication.
Seniors who are isolated are far more likely to fall victim to fraud or exploitation, whether from a trusted family member, caretaker or stranger. A 2016 New York State study found that 67% of verified cases of financial exploitation were committed by family members alone. A 2011 MetLife study found that older seniors (aged 80–89) living alone are at greater risk.
Consider the McLellan imprisonment case cited above. One of the most tragic details in that story is that the elderly man evidently had no family or friends to care for him or to look out for his interests; McLellan’s rescue came only after a neighbor at the motel grew suspicious and contacted police.
If you have aging relatives or friends, it’s better to talk to them in advance about the dangers of financial abuse and exploitation, and how to prevent becoming a victim. A timely discussion about family finances can be important to prevent a possible financial disaster. Check out our earlier Project Invested guide to talking to your aging loved ones for tips on improving communication about money matters.
Furthermore, financial advisers, investment managers and banking experts can play a vital role in spotting illicit and unusual account activity that could be indicative of fraud. In recent years, the industry has stepped up efforts to educate its members on the signs of fraud and financial exploitation, and those efforts are bearing fruit.
Luis Aguilar of the Securities and Exchange Commission (SEC) emphasized in a 2014 speech on senior investor protection that it’s legal for financial firms to disclose information about their customers when financial abuse is suspected.
“To make that clear, the SEC and other federal regulators issued guidance [in 2013] that it is lawful for financial institutions to use customer information for purposes of reporting suspected financial abuse of older adults to local, state or federal agencies,” Aguilar said. “The hope is that by encouraging prompt reporting of elder financial abuse, seniors and retirees can get the assistance they need, when they need it.”
In addition, other community members can also spot danger signs. Doctors, for example, may spot early signs of cognitive impairment that could leave a senior patient vulnerable to exploitation. Sharing that information with family members and trusted contacts can help families to prepare for what’s to come.
“That financial abuse of older Americans is rampant today is no commentary on seniors and their judgment; it is a simple fact of life that many older adults are highly vulnerable to being financially exploited,” Dr. Robert Roush, professor of geriatrics at the Baylor College of Medicine, explains. “And knowing that there are medical conditions that increase the likelihood of success for investment swindles targeting older Americans makes enlisting their health care professionals to help spot their vulnerability to financial abuse the right thing to do.”
In addition to the threat of financial exploitation and fraud, cognitive decline can impact healthy and apparently normal functioning seniors, impacting financial decision making and increasing someone’s vulnerability to exploitation. Cognitive changes can be impacted by a range of issues, including biological, psychological and environmental factors.
NYU Langone Medical Center Clinical Neuropsychologist, Chris Morrison, PhD, ABPP recently discussed cognitive decline and the many factors that influence it. Unfortunately, he states, “the vast majority of adults will experience at least some isolated cognitive decline associated with typical brain aging as they progress through their sixth, seventh, and eighth decades (or beyond).”
As America ages, financial professionals, as well as family members and friends, need to recognize that financial abuse, fraud and cognitive decline is a threat and to take appropriate steps to adequately prepare for it.
Know the warning signs
It’s also a good idea to familiarize yourself with common warning signs or unusual behaviors that might suggest fraud or financial abuse. Whether you’re offering support to an aging family member, or if you’re a financial professional monitoring your clients’ accounts, here’s a helpful list of potential indicators of exploitation:
- The individual has new close friends or “sweethearts” and they move away from existing relationships
- They are being accompanied by a caregiver or family member who will not allow them to speak without them being present
- They appear/sound like they are being “coached” by another individual
- They are dependent on another to provide care
- They indicate that items are missing from their home
- They demonstrate a lack of responsiveness or inability to follow-through with a decision
- They request frequent password/username resets
- They are reluctant to discuss financial matters which were previously a matter of standard practice
- They have atypical or unexplained withdrawals, wire transfers, debit transactions, or other changes in their financial situations
- They abruptly change their will, trusts, powers of attorney, or beneficiaries of their accounts
- They have bills that are not being paid or has mail piling up
Furthermore, learn to recognize the common types of financial scams used to exploit seniors. The Securities Industry and Financial Markets Association (SIFMA) has prepared a handy-two-page briefing paper that details common frauds like lottery scams, ‘granny’ scams, power of attorney abuse and more. Check it out here.
These are just a few of the steps that you can take now to ensure that you and your family are prepared against the potential threat of elder financial abuse — remember that prevention is the best medicine. In our next article, we’ll take a closer look at some policy and regulatory solutions that the financial industry is working to advance with policymakers at the state and federal level.
On October 20–21, 2016, the Securities Industry and Financial Markets Association (SIFMA) and the Financial Industry Regulatory Authority (FINRA) will co-host the Senior Investor Protection Conference in Washington, D.C. This joint conference will help share information about how to protect some of the most vulnerable members of the investing public.
Kyle Innes is Senior Associate, State Government Relations with the Securities Industry and Financial Markets Association (SIFMA).