Advisors looking for a unique value-add proposition and one that can help with client retention ought to consider the potential vulnerabilities of older clients to financial abuse and fraud.
This isn’t the most important part of the equation – safeguarding clients is – but look at this conversation through the lens of client retention. Say an advisors has a client(s) that are older baby boomers or members of the “silent generation.” They’re likely to be bequeathing assets to their heirs, but there are no guarantees will stick with the same advisor. Even a short conversation about protecting the parents from scams is likely to be appreciated by the heirs and could bode well for the advisors’ retention prospects.
Data confirm the necessity of this conversation. Last year, there were 88,000 victims of elder financial abuse and those are just the ones that admitted it happened. Out of shame, many more likely kept it to themselves. The members of that 88,000 cohort lost an average of $35,000. That’s a year’s worth (or more) of living expenses in retirement for some folks.
Elder financial abuse can take many forms and includes abuse perpetrated by family members, friends, staff at assisted living facilities and outright strangers. Let’s focus on scams run by bad seeds that aren’t known to the victim.
Know the Signs, Tricks
Of course, it pays for advisors to know the signs a client may be falling victim to a financial ruse and how the offenses are materializing.
“Other scams include deceitful investment offers, rip-offs by contractors, romance scams, impersonation scams, and intentional bad advice from disreputable advisors,” notes Morgan Stanley.
Translation: If a client tells you that they paid $10,000 for a new kitchen that should have cost just $5,000 or has been sending money to a romantic interest they’ve yet to meet, alarm bells should go off and a conversation is needed straight away. Romance-based confidence scams, also known as catfishing, are ancient, but the evolution of the internet has increased seniors’ vulnerability to be a victim of any type of financial fraud.
“Internet access has fueled senior financial fraud,” adds Morgan Stanley. “Seniors who aren’t savvy with e-mails can fall prey to notifications of overseas lottery wins, unexpected inheritances from abroad, or even ‘ransom requests’ about allegedly kidnapped younger relatives, who often are away on a college semester abroad program.”
The fix here is surprisingly easy. Suggest to the clients children that they use internet monitoring tools offered by service providers that are more often associated with kids than seniors.
Monitor Cash Transactions
Credit card fraud, while onerous, is something the aggrieved party can recover from. However, the types of fraud seniors usually fall prey is harder to bounce back from because it usually involves ACH transfers or apps such as Zelle. Once the “send” button is hit, there’s no recovering those funds.
An easy safeguard is for advisors whose practices are tied to larger financial services firms with banking services is to suggest to clients or their heirs to shift basic cash accounts to the advisors’ institution. That way monitoring is enhanced. So are the odds of avoiding theft.
As just one example Morgan Stanley advisors “can raise a suspicious situation to Risk, Compliance, or Fraud Operations and ultimately to the Legal Department. When a case is determined to constitute a deceptive or abusive act, Risk and Legal will act to stop the financially exploitative activity and try to protect the client's assets. When appropriate, Adult Protective Services may be alerted and the matter may be reported to law enforcement,” concludes the bank.