By Sheryl Rowling
SAN DIEGO — Dear Money Maven: How can I help protect my parents against senior financial abuse? Should I be worried?— Anxiously, Concerned Son
Dear Concerned,
It’s a shonda that this type of abuse is becoming more and more common. The SEC says that more than 5 million senior citizens fall victim to financial abuse each year. Swindlers eager to take parents’ wealth can include con artists, shady financial advisers, fast-talking telemarketers, and even professional caregivers and relatives who steal from the very people they’re supposed to be looking after!
The younger generation – and their trusted advisors – must help seniors protect themselves. The California Society of CPAs recommends the following five steps:
- Be aware – it can happen to your family
- Identify vulnerabilities
- Take action to safeguard your family
- Look for clues of abuse
- Take action if you suspect fraud
Even seniors who are still sharp may be vulnerable. Con artists use hard-core social influence tactics to gain trust. Seniors may be susceptible for reasons, having nothing to do with mental competence:
- They’re typically home during the day – a prime time for con artists.
- Once retired and living off savings, they may be more vulnerable to con artists who play on their fears.
- Con artists target seniors because that’s where the cash is.
Financial fraud can occur in small amounts over time. For seniors on a fixed income, even $10 here and $20 there can be devastating. The most common scams against seniors fall into three groups:
Telemarketing scams: More than a third of telemarketing fraud victims are over 60 years old. The most common scams are free vacations packages, time shares, sweepstakes, phony charity fund raisers, and expensive 900 numbers.
“Free” lunch investment seminars: Shady financial advisers often lure seniors to a free lunch or dinner, promising advice on “senior” issues such as living trusts or estate planning. Once there, seniors are pressured into purchasing dubious investments such as annuities or promissory notes. Although technically legal, these products are monumentally bad choices for retirees – illiquid, complicated and booby-trapped with high fees.
Religious or social group fraud: Among con artists’ favorite targets are members of close-knit religious or social groups. The con joins the group and then tries to sell fraudulent investment schemes to members.
One of the easiest – and most effective – ways to protect your parents is to talk to them about the common financial scams. Tell them it’s important they know what’s happening – if for no other reason than to warn their friends.
Also, it’s important that children know their parents’ social circle. Are they mentioning a new name? Have they begun to talk about someone that has “a lot of good ideas” about money? Children should introduce themselves to new people entering their parents’ life. Con artists are looking for easy marks, not people with family or friends looking out for them.
Theft committed by a caregiver, such as a nurse or aide, can be very difficult to uncover. A family member, friend or stranger may develop a trusting relationship with the older person with the expectation that they will derive financial gains from the relationship. As the older person declines in mental agility, the opportunity to dip into the bank account for personal needs becomes overpowering. The use of “legal” documents such as joint bank accounts, powers of attorney, and wills can often evade detection and prevent recovery.
There are warning signs of caregiver financial abuse. Watch for signs that a caregiver is trying to control the parents’ actions or isolate them from family and friends. When hiring a professional caregiver, be sure to check their résumé and references and pay for a professional credit and background check. Finally, note that more than half of all instances of caregiver fraud are committed by a family member.
Finally, children might want to get involved with managing their parents’ money. Although this can be a delicate topic to suggest, keeping an eye on things can aid in noticing trouble early. Even simply looking over their phone bills or financial statements can uncover large ATM withdrawals or expensive calls to 900 numbers. When visiting, children can notice whether there are lots of cheap items like costume jewelry or mini-flashlights. They may be purchasing things in order to “win” a contest. If parents suddenly become secretive or defensive about their finances, that may also be a sign that they’ve fallen for a con.
If you suspect that your parents might have been victims of financial fraud, be sure not to lecture them. Criticizing or embarrassing them could result in your parents withholding information. Instead of judging or getting upset, calmly ask about the things that are a concern. Find out more about how they got that piece of jewelry or what was said at the free lunch. Just remember that it may take a while to get some useful information – they may be in denial. People don’t want to believe they’ve been scammed.
If it turns out that your parents were victimized, the fraud should be reported to your state securities regulator’s office. Even without concrete proof, it’s important to get regulators involved. They may be able to connect the dots in ways you can’t.
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Sheryl L. Rowling, CPA/PFS, partner of Moss Adams Wealth Advisors LLC, has been providing tax, financial planning and investment advice for over 30 years, since 1979. Sheryl was named one of the nation’s top 250 financial advisers by Worth magazine, received recognition as one of Accounting Today’s 100 Most Influential People, and was named a FIVE STAR Wealth Manager by San Diego Magazine*. Contact her at sheryl.rowling@mossadams.com.
*Third- party rankings and recognition from rating services or publications are no guarantee of future investment success. Working with a highly rated advisor does not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client, nor are they representative of any one client’s evaluation or experience with the advisor.