The generation that was never going to trust anyone over 30 is now eligible for Medicaid and Social Security. The Baby Boomers have tried everything they can to turn back the clock –from Botox to Viagra - but time conquers all.
Many Boomers have accumulated significant wealth in the form of retirement accounts, home equity, inheritance and their own investments, but they are as vulnerable to financial fraud as any previous generation. A recent survey found that approximately 20 percent of those over 65 were victims of such fraud.
Elder financial fraud doesn’t just happen to those afflicted with Alzheimer’s or other cognitive issues. Seniors – a term Baby Boomers detest – are often swayed by unscrupulous brokers looking to sell unsuitable financial products. Contrary to The Who, they can get fooled again.
Where the Money Is – Stockbrokers Target Over-50s
The conduct of stockbrokers and financial advisors is overseen by the Financial Industry Regulatory Agency (FINRA). As FINRA notes, fraudsters tend “to go after people who are college-educated, optimistic and self-reliant.” That’s where the money is.
People over 50 control more than two-thirds of the nation’s assets. The ideal target is an older person who has recently undergone a major life change, whether a health scare, retirement or death of a spouse. Such changes make a person more susceptible to predatory brokers, who appear to take on the role of a caring friend. Rather than guide the client toward appropriate investments, the dishonest broker recommends financial transactions earning him or her high commissions.
Independent seniors are at higher risk of falling prey to dishonest brokers than the infirm elderly, although the latter are more likely to become victims of financial abuse by relatives and caretakers. Active seniors may trust that their new financial advisor is acting in their best interest, when in reality the individual milks them as a cash cow.
The Wrong Products – Bad Advice for a Senior’s Circumstance
FINRA recommendations state that financial recommendations must be suitable for the client, and not overly concentrated on any specific security or product. The first red flag is an advisor steering an elderly client toward investments totally out of sync with the senior’s needs.
Yes, even older investors need a fair percentage of stocks in their portfolio as an inflation hedge, but there’s a huge difference between blue-chips and the questionable companies some brokers may push. Other indications of elder financial exploitation include:
- Home equity loans used for financing investments
- Time-share acquisition
- Substantial annuity investments
- Sudden activity in long-held, relatively dormant accounts.
Remember there truly is no free lunch. Many seniors are suckered into unsuitable investments through free lunch or dinner offers featuring an investment advisor. That free meal can end up costing hundreds of thousands of dollars or more.
Department of Labor Fiduciary Rule
On April 10, 2017 a new rule regarding investment advice finalized by the U.S. Department of Labor goes into effect. The DOL points out some investments professionals “operate within compensation structures that are misaligned with their customers' interests” and “create strong incentives to steer customers into particular investment products.”
Previously, financial advisors did not have to disclose such conflicts of interest to potential clients. Under the new regulations, the advisor must provide clients with information about any conflicts of interests, all fees paid by the client and commissions received by the advisor, and any compensation the particular firm may receive from third parties for selling their investment products.
It’s no guarantee against elder financial fraud and broker misconduct, but it’s a step in the right direction.
Legal Recourse – What You Can Do
While the federal government and states all have elder abuse statutes in place, laws on financial abuse vary according to the jurisdiction. Elder financial abuse is a crime reportable to authorities, and victims also have recourse via civil lawsuits.
Some older people don’t report such situations because they are ashamed of being hoodwinked, but they are the victim of a white-collar crime. A street thief gets away with whatever cash is in the victim’s wallet. Dishonest investment advisors may get away with a life’s savings. An elder law attorney can help you get back your money and your dignity.