One of the saddest statistics of aging is the growing amount of elder financial abuse.  It’s estimated that seniors lose $37 billion a year to fraud.   Even worse, seniors are often the victims of their own adult children or caregivers.

As the huge baby boom generation ages, and lives longer, the opportunities for elder fraud increase. The FBI notes that seniors are increasingly involved in “romance scams” along with being victimized by fake calls pretending to be from the IRS, demanding money immediately.   Many seniors purchase pre-paid credit and debit cards to comply with threats, thereby losing their life savings.

Now, the financial services industry is using new tools to not only identify but prevent this kind of fraud.  The Senior Safe Act was passed in 2018, and it allowed banks and financial institutions to be exempt from privacy protections when trying to stop, or report, suspected financial elder abuse.

As a result, banks have started regular training programs for their employees, educating them about signs of potential fraud, such as large or unexpected withdrawals from accounts, or suspicious in-person bank visits for cash withdrawals.

Now, financial institutions, particularly broker dealers and investment advisors, have one more tool in the fight against elder financial fraud.  It’s called FINRA Rule 2165 and it creates a “safe harbor” allowing broker dealers and investment advisors to place a hold in disbursements for 15 days if fraud is suspected.

Trusted Contact

As part of the latest updates to Rule 4512, which applies to broker dealers and investment advisors, they are required  to make “reasonable efforts to obtain the name of and contact information for a trusted contact person upon the opening of a non-institutional customer’s account or when updating account information.”

As a result, you may be contacted by your financial institution or advisor asking you to name a “trusted contact” who can independently verify any unusual circumstances in your account to prevent possible financial exploitation.

While intended to provide protection, this can also raise issues.  Is your adult child really your most trusted contact?  Sadly, this is not the case for many seniors.  Perhaps it would be better to name someone independent of your family – the lawyer who drew up your estate plan, or a younger friend who is not a potential beneficiary after your death. That trusted person could be a fiduciary financial advisor.

Michele Kryger, head of Elder and Vulnerable Client Care at AIG the giant life & retirement insurer, notes that most senior financial abuse goes unreported.  That’s either because the senior is too embarrassed to reveal she or he has been “taken” – or because they are fearful of the family member or caregiver who abuses them.  AIG has been a leader in training the people at their call centers, as well as all U.S. employees, to look for signs of potential elder fraud.

A recent AIG study show that nearly half of seniors manage their finances – and face these threats – entirely alone.  Kryger suggests that aging seniors have not only a “trusted financial contact” but set up a dual power of attorney, and give a copy to your bank, broker, or other financial institutions.    That dual POA would require not just one person, but two trusted people, to agree on any major financial or investment changes or withdrawals. This added check could help prevent the kinds of financial fraud that impoverish seniors on a regular basis.

Elder financial fraud is a slippery concept.  It requires teaching a generation that may be lonely and alone not to respond to phone calls or emails promising romance or threatening loss of their home.  It requires a real education effort to teach everyone to avoid clicking on links in unsolicited emails, or giving out private information such as Social Security numbers over the telephone.

And even worse, for a generation that is often aging alone, it requires deciding  who in your life is truly trust-worthy so you can name a “trusted contact” and empower your bank to protect you from fraud.  Finding a trusted person — likely not a member of your family — is the toughest job of all. And that’s The Savage Truth.