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Helping Elderly Clients Spot Scams

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Andrew Ahrens, of Ahrens Investment Partners, a financial advisor based in Lafayette, La., has a problem. “I have all these little blue-haired old ladies who keep bringing me home-made cookies, which I then eat,” he complains with a laugh.

The reason? He’s done each of them some favor like helping them buy a car. “I’ve probably bought 250 cars for older clients — mostly widows,” he says.  “They’ll tell me they’re buying a new car, and I’ll ask what they’re paying. Often it’s an outrageous amount, so I go see the dealer and the price will go way down as soon as I walk in.”

Ahrens, an advisor with LPL, says he has learned over the years that older clients — who  represent about 30% of his book — are walking targets for financial abuse and scams, and he long ago decided that part of his job as a financial advisor had to be helping to protect them.

“Older people are getting taken advantage of at every turn,” he says, “and as advisors, we’re in a good position to spot it when it’s happening because we can look at their accounts. The way I see it, I can’t afford not to help these people.”

He’s certainly right about the scale of the problem.  According to Consumer Reports, there are 5 million cases of elder financial abuse every year, but because so few of the victims report it—either because they don’t realize it’s happening or because they are too afraid, or too embarrassed, to say anything, only about one in 25 cases gets brought to the attention of law enforcement. And the amount of money lost is staggering: the U.S. Dept. of Justice estimates that crooked telemarketers alone bilk people out of over $40 billion a year, with 80% of the victims being people over 50 years old.

Typical ripoffs include pyramid or Ponzi schemes, credit card fraud, lottery scams and ID theft, as well as sale of goods and services that never arrive, or overcharging for goods or services, often through high interest charges or other payment tricks.

Ahrens says, “I tell my clients, ‘Don’t discuss investments with anyone or give money to anyone who contacts you by mail or phone or at home. If someone says they have an investment idea for you, tell them to call me.’  And you know what? Not one has ever called me.”

But Ahrens doesn’t stop at just protecting his older clients from investment scams. “Everyone is trying to cheat older people,” he says. “I tell my clients, don’t pay for anything—a car, a house repair, a plumbing job, an extended warranty or anything— without telling it to us. That really makes them feel secure.”

He adds, “We advisors are the most important people in the lives of our clients after their physician. We provide them with a financial security blanket.”

Monica Daggs, vice president for trading and operations at CUSO Financial Services, is responsible for watching for fraud at her company. She agrees with Ahrens that advisors are in an ideal position to play a key role in protecting elderly clients from financial abuse, which she says she has seen “escalating over the last three to give years.”

“I’ve seen the things than can go wrong,” she says. “We spend a lot of time training our advisors about what they can do to stop elder fraud, and about how to work with their older clients to educate them about the dangers.”

Daggs says, “You’ve got mail and email scams with offers that are too good to be true, recommendations of investments that are too risky, investments that are hyped in the media, and even pyramid schemes— though we haven’t seen too many of those ourselves. We also see insurance products being touted that are really complex investments or that are outright fraud.”

A big fraud that is affecting the advising industry lately, she says, is an email scheme where a criminal will get access to a client’s email account, and then send an email to the advisor, posing as the client and saying there’s an urgent need for funds— say a family crisis.

“We tell our advisors not to do anything without calling the client on the phone,” she says.

Another variant will be a message from the client’s email address asking for a blank distribution form.

“It might seem harmless, but the hacker may have found an account number already and can then forge the client’s signature. So we tell our advisors: no money movements based on email. You have to talk to the client in person or on the phone.”

A particularly sophisticated approach, she adds, is for the emailer to provide a new address for receiving account statements.

“They’ll then wait a while and eventually ask for a disbursement to be sent to the new address. So we’re very careful about payouts to new addresses. When we get a new address for a client, we encourage the advisor to call the client at the old number they have for them, to check out whether they’ve really moved,” she says.

Another recent and growing scam, Daggs says, is callers or emailers who claim they are with the IRS or the SEC, claiming the client owes the government money and will be arrested if they don’t send a payment immediately.

“We tell our advisors to warn their clients: Don’t talk to people like that on the phone or answer emails like that. The IRS and SEC don’t contact you that way. They send a letter. And they don’t threaten you with arrest.”

Winnie Sun, another LPL advisor in Orange County, Calif., is managing director and founder of Sun Group Wealth Partners.

 She works primarily with high net worth investors in the Los Angeles area media industry, but she says even clients who have had considerable investment experience, when they get older, can fall prey to scammers.

“I had one client in his 80s,” she recalls. “He had been a very successful insurance salesman, so he felt he was very savvy financially, but I found that as he got older, things started to go wrong. He was constantly being solicited by scam operators —almost daily.”

Luckily, she says, she had control of his accounts, and so she was able to keep him from getting “sucked in” to bad investments.

When he got older, this client had to go into a nursing home. His family was in Europe at that point, so Sun says, “I had to make sure the home was good, and was treating him well, so I’d go and visit him... He was this old wealthy Irish-American guy and I was a young Chinese girl. I’m sure some people were sure I was trying to get his money, but I just cared about him, that’s all. I look at all my older clients as people who we owe attention to. It’s just part of our job. I enjoy it, and I hope more people do it.”

Sun says that the scams she’s seen tried on her older clients include an array of penny stocks, investments for oil-drilling ventures in remote parts of the world, ultra-long indexed annuities with “enormous embedded fees,” and of course, deals for prepaid funerals and coffins.

“Dealing with elderly clients is like having clients with special needs,” she says. She urges advisors with older clients who may have always been savvy to pay attention to how they are aging. “Listen carefully to their speech, whether they’re starting to slur words, or if they sound confused sometimes,” she says.  “I like to call my older clients every week, just to say, ‘Hello, how’s it going?’”

Daggs addresses one delicate subject that advisors with older clients may run into: what to do if you decide that an older client of yours appears to be losing mental acuity.

“We encourage the advisor to go to the client—not to say I don’t think you can handle your financial affairs —but to say something like, ‘Hey, let’s talk about estate planning. We haven’t done that in a while.’ That’s a good way to bring the kids in without it being insulting or threatening.”

That way, she explains, the advisor is not left in the position of breaching a trust by calling a child to say their parent or parents are mentally incompetent. “When the child or children are in the room with the client discussing financial matters, if there’s a problem they will see it for themselves,” she says.

Of course, she adds that there is also the need to protect older clients from possible financial abuse by family members. “If the child is a trustee and we have concerns about whether the child really has the parent’s interest at heart, we’ll talk about money movements and see if the client is aware of what’s going on,” she says. She adds that if fraud or abuse is suspected, advisors are told they can call an elder abuse hotline.

Ahrens, for his part, says even if he ends up eating too many cookies, he’s happy to help older people to avoid scams, whether they are wealthy clients or not.

“The truth is, you may help some old man avoid getting ripped off, and he’ll turn out to have a grandson who’s an oil executive. Actually that happened to me, and I got the grandson’s business. It’s karma,” he says. “Thank goodness it happened early in my career so I never did develop that arrogant attitude that I only take care of people with money.”

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