Elder Scams: How Financial Advisors Can Protect Clients

Our senior years should be a time to enjoy retirement doing things we love, whether traveling, spending time with family or becoming active in our communities. Sadly, many scam artists, attracted by big bank account balances, a trusting nature and — at times — declining mental acuity, like to prey on seniors. 

According to Consumer Reports, there are about 5 million cases of elder financial abuse each year, but unfortunately only about 1 of every 25 cases are investigated by law enforcement.

Financial advisors who work with older clients can play a key role in helping them spot and avoid these scams. Here are some of the more common financial scams directed at seniors and others.

Seniors will receive phone calls from people purporting to be with the Internal Revenue Service demanding payment for back taxes. They threaten arrest, revoking their driver’s license and other threats. The reality is the IRS will never call with issues; they will write. Seniors and anyone contacted in this fashion should just hang up. (For related reading, see: 10 Tips to Avoid Common Financial Scams.)

One major email scam is actually directed at financial advisors. Someone will hack a client’s email account and posing as the client send an email to their financial advisor saying there is a family financial crisis and that they need money to deal with it. Any responsible financial advisor should make it mandatory to confirm this via phone with the client before doing anything. (For more, see: Financial Advisors are Feeling Cyber-insecure.)

Email and mail scams are regularly directed at seniors touting investment and insurance products with returns that are too good to be true. Like anything else it’s a good idea to check out the company offering this too good to be true deal independently and not by clicking any links in the email. (For more, see: Baby Boomers Beware: Financial Fraud that Targets Seniors.)

Seniors have been targeted by callers claiming they had won some foreign lottery but they need to send an amount of money to cover taxes or other seemingly incidental costs associated with the lottery prize. (For related reading, see: How to Avoid Becoming a Fraud Victim.)

In one well-publicized case Wells Fargo Advisors had a client who had sent money to several such scammers and when the adviser got wind of what was happening they refused to transfer additional funds even though their client requested they do so. (For a list of common bank account fraud methods, click here.)

Scammers posing as healthcare or insurance professionals will call seniors in an effort to gain personal information about them. They may use this information to say they’ve spoken with one of the senior’s relatives and the relative said that is OK for them to give the caller their personal data like a Social Security number or their driver’s license number. The scammer will often use this information to submit fraudulent medial insurance claims on behalf of the targeted senior. (For more, see: How Advisors Can Help Clients with Dementia.)

Financial advisors are supposed to be trusted advisors for their clients. But sometimes dishonest financial advisors have been known to scam their senior and elderly clients. These scams might take the form of diverting money to their own accounts from client accounts over which they have withdrawal power.

Clients should always review every transaction on their statements. If a client is losing mental capacity it is important to get family members involved to the extent possible to help ensure the client is not the victim of financial fraud. (For more on aging and investing, see: The Seasons of an Investor's Life.)

Financial advisors can play a key role in helping to protect elderly clients from financial scams and outright fraud. Based on the personal relationships they have with their clients they might ask and encourage them to run any offers or sales pitches they receive by them first. This will allow you as the financial adviser to show them why these pitches are not in their best interests and how the scam would work. (For related reading, see: How Advisors Can Help Protect Vulnerable Clients.)

Financial advisers can be proactive with not only their older clients but all clients and send them information about financial scammers to help them recognize these fraudulent pitches when they occur. These educational pieces might include the basics about not giving any personal information such as Social Security numbers and account numbers, among others, to anyone over the phone or by email. This information could be presented as an email (or mailing), as part of a client meeting or perhaps as a group event for clients and friends. (For more, see: Advisors Should Consider a 'Dementia Protocol'.)

If a financial adviser notices that a client’s mental capacities are diminishing they should ask the client if it is OK to bring a family member into the picture to help the client. If there are adult children the financial adviser can work with their client to schedule a family meeting to discuss the client’s situation and voice some of their concerns. Ideally, the outcome will be that a younger family member will become involved with the client and help them deal with their finances and ultimately avoid being taken in by scammers preying on the elderly. (For more, see: How to Parent Your Aging Parents.)

Every such situation will be a bit different and this cam certainly be an emotional thing for older clients to face up to. Financial advisers have a responsibility to do what is in the best interests of their clients and sometimes that means dealing with uncomfortable situations. (For related reading, see Talking to Aging Parents About Money.)

Sadly, there are many financial scam artists who make a “living” preying on senior and the elderly. Financial advisers can play a vital role by educating their clients and the families of their clients about these scams. (For more, see: Financial Planners: Specialize in Seniors.)