INSIGHT: Be Aware of Risk Factors to Help Elderly Loved Ones Avoid Financial Abuse

[USAA]

 

Earlier in my career as a financial planner/advisor, I worked with an elderly client who had considerable net worth and lived at home, but whose only close personal relationship was with her caregiver. This client’s portfolio consisted mainly of high quality municipal bonds that were also tax exempt at the state level.

Over several days, I received calls from her demanding that we liquidate the entire portfolio – now. She sounded confused and under stress, and I could hear someone in the background coaching her on what to say. I asked if I could speak with the person whose voice I heard, and my client became even more upset, and again demanded the immediate sale of her securities, although she could offer no reason for needing the money. I explained that it would take some time to settle the trade, and in the meantime, I contacted my manager to discuss what could be done. After several more discussions between the client and our team, it was decided that we could not legally continue to delay or prohibit the transaction under the circumstances.

I lost track of the client after that, and I have always suspected that she was under the influence of an abusive caregiver or others. I don’t know if she suffered significant financial loss from these events, but I will never forget the fear and exasperation in her voice while I was talking with her.

What is financial elder abuse?

Although there are several definitions of financial elder abuse from sources such as the National Center on Elder Abuse, or the Centers for Disease Control and Prevention, a simple but appropriate description is: “Failing to do, or doing, something that results in harm or puts a helpless older person at risk of harm.” However, coming up with an exact definition is hard given that financial elder abuse can overlap with other types of abuse such as physical abuse and neglect.

How big is the problem?

Recent studies have estimated the dollar amount of financial elder abuse to be around $3 billion per year, with one out of 10 seniors being victims of some form of elder abuse. However, very few incidents of financial elder abuse are reported, so the dollar amount and number of victims could be much larger. In addition, financial elder abuse affects more than the wallet, as great emotional harm and stress tend to accompany financial abuse.

What are the risk factors?

Although it’s difficult to establish cause-and-effect relationships between risk factors and financial elder abuse, older people generally are more at risk when they:

• Are still financially responsible for an adult child or grandchild
• Have low levels of social support or are socially isolated
• Are going through bereavement
• Require assistance with activities of daily living, are in poor health, or are dealing with depression
• Have experienced previous traumatic family events.

Who are the perpetrators of financial elder abuse?

The perpetrators of financial elder abuse may be surprising. Although internet and phone fraudsters are a real and growing problem, interviews with victims show that most of the perpetrators of financial abuse are family members and non-strangers. It may not make the news, but a family member badgering an elder person for money constitutes financial elder abuse and is the most prevalent form.

What can you do?

Although there are numerous initiatives underway to better manage financial elder abuse, here are some starting points to help protect yourself or loved ones in your life:

• Involve trusted family members in your financial and estate planning to avoid conflicts and surprises.
• Consult with a qualified financial professional or attorney before signing complex agreements or anything you don’t understand.
• Build relationships with professionals who are involved with your finances – they may provide another set of eyes and ears in your financial life, and assist in monitoring for suspicious activity.
• Limit your use of cash – using checks and credit cards leaves a paper trail.
• Feel free to say “no” or “let me check with my advisor first” – don’t let attempts of kindness end up harming you financially and emotionally.

USAA members can learn more about protecting themselves, as well as reporting suspicious financial activity or fraud, by visiting the Report Fraud webpage.

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.

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