Two Things Professionals Can Do About Elder Financial Abuse

It’s vicious and pervasive. It’s growing. It has been called “the crime of the century”. Elder financial abuse, according to a study by True Link Financial, costs seniors in the U.S. over $36B a year. But can financial professionals do anything about it? We say definitely yes.

Most of us have encountered this kind of opportunistic crime at some point, among family, neighbors or friends. When we at AgingInvestor.com present to groups of professionals we ask how many have had witnessed this kind of abuse with anyone known to them. Almost every hand goes up. The question is, what can you do about it?

Many professionals are either hesitant to get involved because they think privacy concerns should stop them, or they want to take action but are unsure about what to do. Let’s clear away those concerns now.

First, remember that when your client gets ripped off and cash is drained out of the account you manage, you are losing fees for those AUM. If that isn’t incentive enough to be involved note that NASAA has already developed model rules which will require that you report abuse to authorities. Those are likely to become mandates soon enough.

Let’s look at two basic steps any professional can take now to improve your response and protect your clients from financial abuse.

Get third party contacts on file

One, you need to get from your retirement-age clients the names of several trusted others whom you can call in the event that you see red flags that abuse could be going on. Remember that family members are the most frequent abusers of aging folks. Perhaps that favorite one, Sonny Boy is taking advantage of a vulnerable parent or other relative. Be sure one of the contacts you get from your clients is not a family member, but a trusted friend, colleague or professional. Age makes all of us more vulnerable to financial manipulation for many reasons. Next time you review an older client’s portfolio, get this necessary information about whom to call if you get concerned and keep it on record.

Get permission from your client to call the third parties under certain circumstances

Two, you need not consider privacy rules a barrier if you have your client’s permission to contact the designated third parties he has identified. A legally sufficient privacy document will help you. This is an area where both legal and compliance departments should assist you to get the right paperwork in order. At AgingInvestor.com, we developed just such a model document, a product we offer to overcome the confidentiality barrier to taking action. It’s part of a senior-specific policy. And you can do it in-house on your own too with legal input. Get one done for every aging client. It resolves the question of giving private information to the designated third party. You will have the ok to act when you need to.

Caution: we do not recommend that you use an informal letter to for your client to give up the right to privacy. Consider that in our society, we use things like a durable power of attorney to give up the right to solely manage one’s finances, and an advance healthcare directive to give up the right to make end of life or care decisions alone. We don’t use mere letters for these things. You need papers that are standardized, formal and that will stand up to scrutiny should anyone question them.

Surely you do not want predators to take advantage of your clients, particularly when they suffer from any cognitive decline. That increases their vulnerability. And the integrity of their portfolios is enhanced by your own vigilance over them as they get older.

Take a deeper dive into the elder abuse subject in our book Succeed With Senior Clients: A Financial Advisor’s Guide to Best Practices. We offer you a handy checklist with the 7 warning signs of financial elder abuse, more practical tips and some true stories of how a financial professional did or didn’t get involved at the right time.

The most forward thinking financial advisors will be early adopters of these means to keep clients financially safer. Be one of those leaders!

by Carolyn Rosenblatt, RN, Elder law attorney, AgingInvestor.com

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