Christopher HopkinsThere is undoubtedly a very hot place awaiting the miscreants who swindle and defraud seniors. And yet, the temporal rewards often appear to outweigh the empyreal costs, as financial crimes against the elderly continue to increase.
Despite significant progress in raising awareness of the problem, incidences of such crimes continue to increase according to a recent survey of state securities regulators. Last month's report from the North American Securities Administrators Association concludes that the problem is growing, and that financial professionals including advisers and broker-dealers are not doing enough to stem the tide. As more boomers glide into retirement, the problem worsens.
Attempting to assess the magnitude of this scourge, True Link Financial and the Stanford Center on Longevity conducted a comprehensive study of elder financial abuse in 2015. The results were startling: $36 billion in annual losses, far beyond previously accepted estimates. Nearly half that amount is attributable to nominally legal but unethical sales, including quack health products, hidden fees and charges, and misleading or inappropriate financial advice.
That is bad enough, but there's more. Nearly $13 billion was appropriated from seniors via direct criminal fraud, including cons and identity theft. And astonishingly, the study found over $6 billion in theft perpetrated by family members and caregivers. There is perhaps no destination hot enough to properly avenge the villainy of these cretins.
While it is certainly true that diminished cognitive ability makes victimization easier, financial fraud and abuse is hardly limited to that segment of the elder population. The American Journal of Public Health reports that 6 percent of "cognitively intact" seniors fall victim each year to scams, fraud or financial abuse. In all, it is estimated that one in five adults over age 65 have fallen victim to some type of financial scam or swindle.
One factor that makes this problem especially confounding is the embarrassment factor. It is often the case that victims of financial crimes, and especially senior victims, are reluctant to admit to having been had. The U.S. Senate Special Committee on Aging estimates that only one in 15 cases actually is reported.
So what can be done to chip away at this pernicious and growing threat?
For starters, seniors should recognize that they are potential targets. This great generation was raised to be polite, is hesitant to hang up, and sometimes too well-mannered to shut down a potential con artist in his tracks. Awareness and a healthy dose of skepticism are not only not impolite, but essential in deflecting potential threats.
Family and friends must also remain on watch for signs of danger. Be aware of any new relationships involving people with whom you are not acquainted. Watch for unusual activity like large withdrawals or overly-generous gifts. Question any significant changes in legal documents like wills or powers of attorney, especially if you suspect diminished cognition. You might also speak with your loved one's professional advisers (attorneys, financial consultants, etc.) and ask them to be on guard for red flags without violating any obligation of confidentiality. To borrow a phrase: if you see something, say something.
Legislators can also help, as in a proposed bill from Sen. Susan Collins (R-Maine) that creates legal protections indemnifying brokers and advisers from liability arising from reporting suspected cases of financial exploitation involving their elderly clients. Many states are adopting similar statutes to encourage good-faith efforts to expose potential abuses.
If you suspect potential fraud against yourself or a loved one, the U.S. Justice Department has an excellent website with advice on how to report suspected abuse at justice.gov/elderjustice/ financial-exploitation.
Christopher A. Hopkins, CFA, is a vice president and portfolio manager for Barnett & Co. Investment Advisors.