May 29, 2015 | aging, aging investor, diminished cognition, elder investor, elderly, financial elder abuse, finra, investor, medicare, scammers, senior citizen investor, senior investor
Most of us hear about unscrupulous family members taking advantage of their aging parents or grandparents. And everyone knows that internet scams abound. The one in which the scammer calls an elder and pretends to be a grandchild in trouble is notorious. And unfortunately, successful as it still goes on. Funds from grandma’s account get wired to Western Union and the thief disappears.
Financial elder abuse is rampant. The National Center On Elder Abuse puts the amount stolen from elders each year at $2.9B. But a privately run recent study calculated the amount at a shocking $36B+ per year. Who is doing this to our seniors?
Family members are the most frequent abusers of elders, because of access, exploiting the relationship of trust, and knowing just how easily manipulated a parent or other loved one can become with aging and dementia. Family members usually know how much money their parents have and how to get the parent to either give it to them or give them control over it so they can take it without the parent’s knowledge. Sadly, we see this often in our consulting work at AgingParents.com.
Caregivers, who also develop a relationship of trust with their care recipients, have the advantage of being with the elder in unsupervised situations. Ruthless caregivers get the elder to sign a power of attorney and being dependent on the caregiver, the elder may be fearful and intimidated if she does not acquiesce to the demands of the caregiver. In one case, a caregiver managed to steal $4M from a 74 year old client with multiple sclerosis who became physically unable to manage for herself. The caregiver got a power of attorney and opened 67 accounts in eleven banks. One bank finally caught on and reported their suspicions, but it was too late. The caregiver went to jail but the elder died before the criminal’s sentencing.
In spite of the easy access family and caregivers have to seniors, the most dollars are actually stolen from elders every year by professionals. That includes broker-dealers, insurance sales persons, lawyers and others in a position of both trust and authority to manipulate or outright steal elders’ funds. About a third of FINRA prosecutions involve elders. There are ripoff artists among us.
One thing that doesn’t seem to change over time is the reality that most cases of elder abuse go unreported to authorities and are therefore never prosecuted. The thieves get away with it. In one case we saw in our office, a 92 year old whose son had power of attorney for her took thousands of dollars from her bank account and refused to account for it. We were involved in helping her change the authority he had over her finances. I spoke with her and described that what her son had done was wrong and was a crime. She knew it was wrong and did not want to take action. Her response: “I don’t want my son prosecuted”.
Many elders are more frail and less willing to pursue legal remedies than a younger person may be. They suffer from shame, depression and embarrassment that they have been so taken in by anyone. Some just don’t have the energy to fight back and the thieves know this. They count on it.
What can the concerned financial professional do about financial abuse? There are ways you can be more vigilant and protective of clients than ever. Here are five things to keep in mind for any aging client.
- Know that even at the very earliest stages of dementia, a client is likely to be moderately impaired for making safe financial decisions. Pay attention to their ability or lack of it to understand complex or risky products such as non-traded REITS, which regulators disapprove of selling to seniors. Avoid suggesting or offering any products which require significant analysis by the client if you have even a hint of cognitive decline in that client.
- Know that age alone is a risk factor for developing dementia and its accompanying diminished capacity. By the time your clients reach age 85, at least a third of them will have Alzheimer’s Disease or other dementia. Two out of three persons affected by Alzheimer’s are women. Be especially vigilant with your aging female clients.
- Know your client. If he or she departs from a long standing spending pattern and you suddenly see unexplained large cash withdrawals, be suspicious, ask questions and probe. Someone could have gotten control over your client’s account. Don’t stand idly by. Get involved and find out. Report abuse if you suspect it. Take action to stop the abuse. Protect your client.
- If you work in an organization where professional colleagues have aging clients and there is opportunity to either sell them unsuitable investment products or otherwise manipulate these elders, lobby your organization for enhanced and more frequent scrutiny of all client accounts for people age 65 and up. The Federal Government and state laws define an “elder” as someone 65 and above. Watch those accounts more often and in more detail.
- Develop your own best practices, senior-specific policy, in writing. Training in best practices and commitment to your clients’ safety will enable you to get it right. Once you have a clear policy in place for yourself independently or for your organization, everyone can respond to red flags of diminished capacity and warning signs of elder abuse in a uniform way. That will enhance your ability to honor your clients so you can protect him from predators.
By Carolyn Rosenblatt, RN, Elder Law Attorney
AgingInvestor.com
Apr 18, 2015 | aging, aging investor, elder investor, elderly, financial elder abuse, finra, investor, scammers, senior citizen investor, senior investor
Imagine this scenario. The person making all financial decisions was the man of the house. His somewhat timid wife, married to him for many years, never wanted the responsibility to decide how to invest. They had a multimillion dollar estate. Then Harry, her husband died and she was totally unprepared.
That’s “Rosanna’s” story. Rosanna was married for decades to Harry who passed away at age 85. She was 82 at the time. They had three adult daughters and one son, Jackson. Their son was never a steady job holder and had fantasies of how he was going to be a business owner. After his father died, he saw an opportunity. He could easily manipulate his mother, who looked to him to essentially take Harry’s place with decisions about investments. Rosanna had begun to suffer serious memory problems and couldn’t remember a conversation from morning to evening. She was clearly a person with diminished capacity.
Jackson was a co-trustee on the parents’ trust with his mother and sisters, but had sole power to make investment decisions. He conspired with the long time broker-dealer who used to work with his father. The broker also saw an opportunity. The broker told Jackson that he could help him out but Jackson needed to put a lot more of Rosanna’s money into variable annuities. What this meant was that her money would be tied up for years, unless she paid a stiff surrender charge to get to it. A full 87% of Rosanna’s money was then shifted into variable annuities. When Harry died, the amount invested in annuities was about 40%, which was plenty. This shift of most assets into annuities of course generated a huge commission for the broker. About the same time, Jackson took a six-figure loan from Rosanna’s trust without consulting his sisters and without informing them.
They were angry and upset with Jackson for manipulating their mother, for taking out a “loan” from their mother’s trust, which he didn’t pay back and for sneaking around behind their backs putting so much into variable annuities. That was going to affect their inheritance. When the sisters called me, we discussed the issue of manipulation of their mother. No one had ever checked her out for her capacity for financial decisions. When her daughters wanted her to see a doctor to find out more about her memory troubles, Jackson vetoed it. Rosanna consulted Jackson on everything. This meant that legal action was necessary. I referred them to an elder abuse attorney to take up the cause. They were very distressed and not speaking to Jackson. Meanwhile, Jackson again manipulated his mother to get money from her, with which he hired an attorney to harass and threaten the sisters. It was ugly.
No one can be sure how this nasty tale will play out, but the regulators will probably not like the fact that the broker put so much of an 85 year old’s assets into variable annuities. They will probably not like that he had to override his firm’s internal controls set up to prevent that. They will probably not like the fact that the net result is that the estate lost a significant sum compared with what it would have done in conventional investments suitable for an 85 year old. I sent the sisters the forms to file complaints with both FINRA and the SEC. They will also have an attorney to represent them in that matter.
And as for Jackson, I hope that the courts will deal with him justly. He is looking out for himself, that is clear. As a trustee, he had a legal duty to the trust, not to his own self interest in grabbing a six figure “loan” from the trust that he had no means to repay.
The takeaway here is that your aging clients, particularly the very unsophisticated ones like Rosanna are sitting ducks for abuse by unscrupulous brokers. And it is up the the advisors who are ethical to blow the whistle. It is up to everyone to seek justice for the unwary who become victims of manipulation because of greed, the ease of taking advantage of an elder, and the attitude that “it’s not my problem, she’s not my client”. Please make it your business. At AgingInvestor.com, we want to put a stop to this kind of abuse. We urge you to join us!
Click HERE if you want to help us make a difference.
Until next time,
Mar 16, 2015 | aging, aging investor, elder investor, elderly, financial elder abuse, investor, scammers, senior citizen investor, senior investor
Attention Financial Professionals: Are You A Hero? We want to highlight you!
We are very interested in financial planners, wealth managers, RIAs, CFPs, trust officers and others who have protected elderly clients from abuse or stopped it after they became aware of abuse or predatory practices. Without a fiduciary standard, inappropriate products are being sold to elders by some in the financial field. And that doesn’t even address the outside predators who seek out elderly victims. They’re everywhere.
At AgingInvestor.com we are allies of the elderly, having spent years of our lives serving them, my wife as a nurse and then a litigator and myself as a mental health provider.
We will be sponsoring a contest in early April to feature the best of the best in financial services who stopped or prevented elder abuse.
My wife and partner Carolyn Rosenblatt blogs at Forbes.com (Aging Parents) and AgingInvestor.com to keep those in this community informed. We want to tell your stories. We hope to educate others in the field and this community by highlighting the actions of courageous people who stepped up to stop scammers, thieves and greedy players inside or outside the financial services field itself. We have a few great candidates already! We know you’re out there. Submit your own name and story or that of someone you respect for their abuse prevention efforts to hero@aginginvestor.com. If you need to remain anonymous for political or personal reasons, we will honor that and not use your real name, location or work place. We want to share your exemplary actions. And if what you did was leave a large organization so you wouldn’t be part of abusive practices there, we think that’s heroic too. Please tell us. We’ll protect your identity totally.
Your stories will inspire others to follow your lead. We’ll feature you in our newsletter with your permission, and let our social media contacts know that you are a standout among the rest. If you want anonymity, we will simply point out the problems that spurred you take the steps you did and that we want to honor the decisions you made. We applaud you.
Thanks for joining us.
Sincerely,
Dr. Mikol Davis & Carolyn Rosenblatt, RN, Attorney
AgingInvestor.com
Mar 12, 2015 | aging, elder investor, elderly, financial elder abuse, investor, scammers, senior citizen investor, senior investor
Heavy advertising by those selling reverse mortgages could convince anyone that this product will get you to nirvana. The sellers tout them, promising to let you “live the life of your dreams” or “have a better retirement”. Really?
The Federal government has responded to numerous complaints by borrowers about reverse mortgages (home equity conversion mortgages or HECMs) and issued a summary report. It’s available through the Consumer Financial Protection Bureau but if you don’t have time to read it, we summarize for you it here at AgingInvestor.com.
The reverse mortgage complaints submitted to the CFPB demonstrate the wide range of problems some consumers have with these loans. The largest volume of complaints, according to the report, center on difficulty in trying to change the terms of the loans. When borrowers want to refinance the loan or add borrowers, they can’t. Some borrowers do not understand that the loan proceeds as well as accrued interest on the loan over time substantially decrease the amount of available equity. What this tells us at AgingInvestor.com is that despite mandatory “counseling” before getting the mortgage, the borrower is not getting the message. Whether that is a defect in the counseling itself or the consumer being swayed by the “live the life of your dreams” advertising we do not know. What we do know is that borrowers get upset when they find out they can’t refinance these loans.
Other consumers complain that lenders refuse to lower their loans’ interest rates and they feel that as interest rates have declined, that they’re being overcharged. Trying to change the terms of the loan at all is very problematic. When adult children want to be added as borrowers they can’t be added. Borrowers do not understand that adult children can only retain the home for an aging parent by paying off the entire loan balance or by paying 95% of the value of the home. Is this a failure to understand the mandatory counseling their parents were given? Or is it that this critical detail is lost in the effort to get an older homeowner to take the loan, “live the life of their dreams” and have a wonderful time with the loan proceeds?
As we see it, the worst outcome of a reverse mortgage occurs when title is transferred to one spouse in order to get the HECM, perhaps because he or she is of an age that makes it possible to borrow more equity than the other spouse could do. The loan is taken in the name of that one spouse only. The borrowing spouse later dies. The non-borrowing spouse then will lose the home. Distraught widows and widowers face foreclosure in this scenario. Of course they can’t pay off the loan or they wouldn’t have needed the HECM in the first place. Some consumers report that their loan originator falsely assured them they would be able to add the other spouse to the loan at a later date.
The U.S. Department of Housing and Urban Development (HUD) is changing this horrible problem. It issued a mortgagee letter in August 2014 that provides that non-borrowing spouses meeting certain conditions, may remain in the home after the death of the borrower spouse but only for loans originated after the date of this letter. Most HECMs originated after August 4, 2014 will be made in both spouses’ names. For the rest of the many borrowers whose loans are older than that, a widowed person will likely lose the home after the borrowing spouse dies. So much for living the life of their dreams.
If you are in a position to advise clients about the pros and cons of a reverse mortgage, be sure that you know these details before directing anyone to such a loan. Yes, in some cases, a HECM can be a lifesaver. But as we see it, that’s only a good idea when there are no other options available to pay the basic cost of living in the home and surviving there to the end of life. It’s not prudent for any consumer to have a lavish lifestyle on borrowed money, only to run out of equity when they need money most: when disabled and in need of care. Consumers need to be cautioned not to take out equity and recklessly spend it as if there were no consequences to depleting what is for many, their only significant asset.
Help us keep elders informed. Please share this with a friend, a client or member of your own family.
Until next time,
Carolyn Rosenblatt, RN, Attorney, Mediator
Dr. Mikol Davis, Psychologist, Gerontologist
Feb 16, 2015 | aging, diminished cognition, elderly, financial elder abuse, scammers
You’d think that after all our vets have sacrificed for our country that somehow slimy manipulators wouldn’t go after them specifically. But, sadly, vets are prime targets for so called “veteran’s advocates”, whose objective is to get their money. Here’s how they work:The objective is to sell vets annuities, which tie up a person’s money for years and years. Annuities of this kind are usually not at all suitable for an aging person. The seller, a company owned or backed by an insurance company, offers veterans a free lunch “educational” seminar. An insurance salesperson is the front for this presentation. They go after elderly residents of retirement homes and assisted-living facilities and convince them that they can get free Aid and Attendance pension benefits offered by the U.S. Department of Veterans Affairs.
These benefits do exist, but no one who is wealthy qualifies for them. The vets at the seminar are persuaded to “reposition their assets” in order to apply for the benefits. Unwitting senior veterans are sold annuities so that they can qualify. Of course that generates handsome commissions and profits for the insurance agent and insurance company.
The insurance companies and their agents selling the annuities go after wealthy seniors in expensive retirement facilities, because people who are truly qualified for Aid and Attendance have no money. They induce the senior to put large amounts of money into an irrevocable trust so they appear poor and can thus apply for free Aid and Attendance.
The wealthy senior vets who get taken by these scammers would never qualify for Aid and Attendance anyway, as one must be low income and with very limited assets to be eligible. Buying annuities does not fix that.
A prominent attorney has now filed a lawsuit against one of these insurance companies and the agent who held himself out as a volunteer for veterans when he was really a salesman. Fraud is alleged in the lawsuit, filed in Riverside County Superior Court in CA. We at AgingInvestor.com hope the case is successful.
How do these slick salesmen who outright lie to senior vets keep getting away with these schemes? The annuity sale scams are a problem nationwide. Victims of financial elder abuse rarely report the abuse. They are elderly, get overwhelmed with the vicious battle the insurance companies will put up to defend their actions and they don’t want to do it.
If you would like to do your part to warn your aging clients or family members about these vet-targeted annuity scams, please send out emails or letters to them and warn them to be alert to the problem. Get your free sample email or letter form from AgingInvestor.com by clicking HERE. Information is power and implementation of this information can protect your clients.
Until next time,
Carolyn Rosenblatt, RN, Elder law attorney
Dr. Mikol Davis, Psychologist, Gerontologist
