9 Signs of Elder Financial Abuse
Elderly financial abuse is the exploitation of vulnerable seniors for financial gain. The Financial Industry Regulatory Authority (FINRA) defines “elderly” as over age 65. Financial exploitation of the elderly can mean changing a will against the elderly person’s wishes, stealing money, or manipulating official documents in order to secure an elderly person’s assets. Elder financial abuse usually occurs at the hands of someone in a position of trust. Financial professionals, nursing home employees, and family members are the most common subjects of elder financial abuse allegations. Unfortunately for elderly investors, this type of exploitation is common. The National Council on Aging estimates that elder financial abuse and fraud result in annual losses of $2.6 billion to $36.5 billion.
In cases of suspected financial exploitation by family members, caretakers or financial professionals should report their suspicions either to FINRA or a state agency. FINRA has a toll-free hotline where individuals can report their concerns of elder financial abuse: (844) 574-3577. FINRA may also refer cases to state agencies for further investigation.
Proving Elder Financial Exploitation
Talk to an investment lawyer if you suspect financial abuse by a broker, and make sure to preserve any investment agreements and conversations with the broker. Elder financial abuse in the securities industry may result in fines and suspensions. Brokers have also been barred from the securities industry following elder financial abuse allegations.
On the other hand, it is sometimes brokers that catch on to elder financial abuse, perhaps at the hands of a family member. FINRA Rule 2165 allows brokerage firms to place temporary holds on accounts if elder financial abuse is suspected. These holds prevent disbursements while the suspected abuse is investigated. Rule 4512 allows investors to provide a trusted contact person for their accounts. Brokers can reach out to trusted contact persons in the event they have concerns about financial exploitation.
9 Signs of Elder Financial Abuse
- Forged Signatures. If an elderly person has an annuity or a security that they do not remember approving, check the authorization documents. Investors should also question electronically signed documents that they do not remember.
- Missing Account Statements. Brokerage firms are required to provide account statements every quarter. There are a few exceptions, including if the investor specifically declines to receive these statements. Fraudulent brokers may decline to receive account statements on behalf of their investors in order to conceal losses and excessive trading costs.
- Changes in Temperament. Elderly people who are stressed about missing funds may become withdrawn. Concerned loved ones should check in to see if finances are a new source of stress.
- Unusual Withdrawals. Always question large, unexpected withdrawals. Any unexplained changes in spending patterns may merit investigation, as well as ATM withdrawals if the elderly person is confined to their home or nursing home.
- Suspicious Changes to a Will. FINRA has strict rules surrounding an elderly person naming their broker as a beneficiary. According to Rule 3241, the elderly person must be a part of the broker’s immediate family or must seek their firm’s approval before accepting their status as a beneficiary. The same restrictions apply to serving as a client’s Power of Attorney.
- Withdrawals from Investments with Early Withdrawal Penalties. Many long-term investments require investors to pay high fees for an early withdrawal – fees that could drastically cut into returns. Unscrupulous brokers may recommend early withdrawals for the sake of investing the money in a security that comes with high commissions.
- New Names on Accounts. If an elderly person adds a broker or another financial professional to their bank account, credit card, life insurance policy, or property titles, family members may want to take a closer look at their finances and question any unexplained withdrawals.
- Unpaid Bills. These may trigger suspicion if the bills were previously paid on time and the elderly person has the funds to make payment.
- Excessive Trading. Brokers may execute an excessive number of trades, also known as “churning,” for the sake of generating more transaction fees for themselves. These fees can translate to thousands of dollars in losses for the client.
Financial Exploitation of the Elderly by Family Members
According to the NCOA, family members are responsible for 60% of all cases of elder abuse. The perpetrators are most often spouses or adult children.
Financial exploitation of the elderly by family members can be especially dire when the family members are also financial advisers. In 2021, a FINRA arbitration panel awarded Beverley Schottenstein a $19 million settlement against her grandsons, who had been serving as her financial advisers. She alleged that her grandsons invested her in overly risky investment products in order to rake in high commissions for themselves. Schottenstein further alleged that her signature had been forged on an investment document. FINRA has since barred one of her grandsons.
What Makes the Elderly More Susceptible to Financial Exploitation?
Elderly people are more likely to be victims of scams and financial exploitation since scammers know the elderly are more likely to have savings and investment portfolios. They may also be vulnerable due to cognitive decline, making them an easier mark for fraud. Cognitive decline can happen in the absence of dementia or Alzheimer’s – it may simply mean that an elderly person has a harder time remembering facts about their finances. Studies have also shown that the elderly are also less likely to doubt any information provided by a trusted individual.
There is also an emotional side to financial elder abuse. Feelings of embarrassment may also prevent them from speaking up. An elderly person may not want to get their financial adviser or caretaker in trouble. This is especially likely if their caretaker is a family member, or if they consider their financial abuser a close friend. In certain cases, financial advisers have become close confidants of their clients, only to exploit that relationship for their own financial gain.
What Should I Do if I Suspect Financial Elder Abuse by a Financial Professional?
Do not hesitate to reach out to our securities attorneys for a free case evaluation if you suspect elder financial abuse at the hands of an investment professional. Investment attorneys may be able to recover your losses through FINRA arbitration. Contact (877) 600-0098 or firstname.lastname@example.org.