Protect Yourself from Financial Scams and Prevent Future Vulnerability

A version of this article was previously published in the March 2019 edition of  Puget Sound Business Journal.

Traditionally, elderly people are targeted for financial scams, but unexpected major life events and other conditions can render any adult susceptible. Anyone can be put at risk following the death of a loved one, an accident, early onset dementia, a chronic illness, and many other difficult circumstances.

Vulnerable Adults

Washington state law defines a vulnerable adult as anyone 60 years old or over who’s unable to care for himself or herself, or an adult with a developmental disability who requires care from others, either in-home or at a facility. The important factor is that they could be taken advantage of because they aren’t able to defend their own interests.

The National Council on Aging reports that exploitation of older Americans results in losses of close to $2.9 billion each year. That number is probably low as many cases go unreported. In addition, one in nine people age 60 and older has reported abuse, neglect, or exploitation within the last year, according to the National Adult Protective Services Association.

Exploitation can take many forms and often start with minimal activity. A loved one may notice small withdrawals or transactions that seem out of the ordinary, checks may go missing from check books, or they may seem confused after buying a certain investment or with little information and sudden limited contact with the client. A contractor could be pretending to work for the utilities company and try to scam someone. These events aren’t always headline news, but small, subtle exploitation can be incredibly damaging to the livelihood of loved ones.

Regulatory Attention

The growing need to protect vulnerable adults is a great concern across the nation, particularly for regulators like the Financial Industry Regulatory Authority (FINRA) and the Securities Exchange Commission (SEC). The North American Securities Administrators Association (NASAA) is leading the industry in their Serve Our Seniors initiative as the voice of state and provincial securities regulators.

FINRA, the regulatory agency for broker-dealers, as an example, now requires its members to make reasonable efforts to obtain the name and contact information of a trusted contact person. The selected person isn’t necessarily someone with access to your accounts, rather someone an advisor can contact if they suspect you’re being taken advantage of or victimized.

Not all financial institutions are FINRA members so they don’t all require this form. It’s important to talk to your advisors about who you want contacted should they ever suspect you’re being abused.

Financial firms can also refuse transactions when there’s a reasonable belief that financial exploitation is occurring. In those situations, the financial institution needs to notify all parties authorized on the account and report the incident to adult protective services. 

Resources

It’s important your advisors act in a fiduciary capacity–meaning they must put your needs first. Terms like “accredited,” “chartered,” or “registered” often accompany an advisor’s credentials but don’t provide actual information on the standard of care they’re required to provide. Ask any advisors you may work with if they have to provide advice under a fiduciary standard of care.

There are also resources available to check an advisor’s record. Steps you can take include:

  • Researching if a broker has had complaints brought against them on FINRA’s website
  • Confirming a firm’s status as an investment advisor and find information on individuals who work as individual investment adviser representative at the SEC website
  • Verifying an individual’s certified financial planner (CFP) status and background on the CFP Board website

Self-Protection

While many financial firms are working to address scams, there are steps you can take to protect yourself.

If you suspect someone is exploiting you or a loved one, contact adult protective services (APS). Their team will ask for the person’s name, address, contact information, and details of your concern. From there, APS will investigate through a home visit and interviews and offer services as needed. They will also work with law enforcement if necessary.

Should you be mistaken about your suspicion, you can't be held liable for any damages resulting from reporting as long as you reported in good faith. Additionally, a vulnerable adult will retain their right and ability to refuse any or all interventions or assistance from APS at any time. Even if you simply have a bad feeling about a situation, but can’t verify the details, professionals at APS are trained to handle these situations.

Prevention

Ideally, planning in advance can help protect yourself and your loved ones so that these calls don’t ever need to be made. Have open and candid conversations early with your advisors and the people you trust while you’re healthy. It’s comforting to think you’ll always be highly functioning, but an accident, illness, or traumatic event could leave even the most competent person vulnerable without warning.

Partner with someone you believe has your best interests at heart. If you don’t have or that person isn’t necessarily your adult child, have a serious conversation with trusted friends or family to list on the trusted contact form. They won’t have access to your accounts, but they will be contacted if your advisor is worried about you, and can help determine whether you’re being taken advantage.

You can also set up power of attorney authorization or establish trusts or joint accounts to help protect your assets and see that they’re used for the purposes you intend. It’s never too early to work on drawing up legal documents like guardianship directives that help provide clarity to others to what type of care you would want should you be unable to decide for yourself.

Additional Tips

Once you’ve found advisors you trust and are obligated to do what’s best for you, work with them to establish a plan. Your advisors will understand your goals and values and will more easily be able to identify behavior and financial transactions out of keeping with your plan.

Generally speaking, don’t agree to buy something if you don’t understand how it works or how it fits into your financial plan. This may come in many forms such as annuities, limited partnerships, and even some mutual funds. There are many financial instruments that aren’t predatory by any means, but should be vetted to fit into your needs and objectives. If an opportunity sounds too good to be true, there’s a high probability it’s not a safe investment, particularly for those on fixed incomes. Higher returns may come with higher risk, potentially higher fees, and less liquidity so it may be harder to get your money when you need it.

 
For more suggestions to prevent fraud, you can request a copy of the CFP Board’s Financial Self Defense Guide for Seniors available through letsmakeaplan.org.

We’re Here to Help

To learn more about your protecting yourself against financial scams, contact your Moss Adams professional.