A Wells Fargo client in California thought he had hit the jackpot. The 78-year-old husband and father was contacted by people claiming to be from the Costa Rican lottery. They told him he had just won $5 million. But before he could collect the proceeds, there were a few formalities. They first needed some personal information to confirm his identity. And they also needed money to pay off various taxes and fees associated with the winnings.
Although elderly, the client was "all there," according to Ronald Long, director of regulatory affairs at Wells Fargo Advisors and one of the leaders of the firm's elder financial abuse prevention efforts. But there were circumstances in the client's life that made him susceptible to the scam. His 76-year-old wife was in poor health and bedridden. The costs of her treatment were considerable and a continual source of stress. "The thought that he had the chance to get more money to make their lives easier was attractive to him," Long says. "And these people fed on it."
The client supplied the scam artists with his wife's personal information, including her Social Security number. He also sent them $88,000. But they needed more. To transfer the $5 million, the scammers told the client they required one last payment of $50,000. The client did not have the money on hand, so he called his Wells Fargo financial advisor and requested that the funds be moved from his Wells Fargo accounts.
The advisor immediately knew something was wrong, Long recalls. Although it was too late to save the initial $88,000, which had been in non-Wells Fargo accounts, the advisor wasn't going to let the scam proceed any further and refused to go forward with the transfer. With the client convinced that he was one transaction away from $5 million, some testy and stressful exchanges followed. "It's a struggle for a firm like us to have to look a client in the eye and say we can't allow you to have this money," Long says.
So Wells Fargo turned to the client's family, persuading his daughter to get involved. Once she was engaged in the process, the client relented. "We kept the $50,000 from going out," Long says. For the team at Wells Fargo, the incident counted as a small victory in its ongoing battle against elder financial abuse.
About seven million Americans over the age of 65one in fivehave been victimized by financial scams, a 2010 report by Investor Protection Trust found. In 2010, the annual losses by victims of elder financial abuse was estimated at $2.9 billion, up 12% from 2008, according to a MetLife study. Yet a 2011 report by the New York City Department for the Aging found that only one in 44 cases of elder financial abuse is ever reported
The reasons? "Typically, the victim will not admit it, which makes it so hard to detect and so hard to report," says Dr. Georgia Anetzberger, president of the National Committee for the Prevention of Elder Abuse. "They won't admit it because of all the prejudice and stereotyping that occurs around old age, because of the fears associated with having somebody find out that they've been scammed. There's the potential for guardianship or some other form of surrogate decision-making being thrust on them." And with the elderly population expected to jump from 39.6 million in 2009 to 72.1 million by 2030, according to the U.S. Department of Health and Human Services, the problem is due to get much worse.
Wells Fargo Advisors began tracking the elder financial abuse cases it encountered in August 2010, Long says. From an average of about 30 cases a month, they now count well over 100. "All of us need to be engaged, to be aware, keeping an eye out and making reports to the appropriate authorities if we see conduct that seems off-kilter," he says.
Seeing the Signs
Experts agree that financial advisors have an essential role to play in fighting elder financial abuse because they are in a unique position to recognize when it is occurring. "The elderly, if they're victimizednobody sees what's happening and nobody's able to report it," says Andrew Capehart, assistant director of the National Adult Protective Services Association. "Sometimes financial professionals will be the only ones that see anything that seems off."
Elder financial abuse is often difficult to spot. It comes in countless forms and isn't always as obvious as a far-fetched lottery scam. But there are a number of red flags for which advisors should watch. Unusual transactions are the most obvious. "You have a client who used to come in once a month and get a withdrawal of $2,000, and all of a sudden that withdrawal is $30,000," Long says.
Changes in the client's physical appearance or demeanor can also be a warning sign. "The client looks disheveled, unkempt or very forgetful," Long explains. "Any of those could be external abuse or dementia."
Other things to watch are sudden changes in estate plans or a new power of attorney who might be acting suspiciously. Since the most common perpetrators of elder financial abuse are family members, advisors should be mindful of these relationships. If a relative or caregiver seems to be isolating a client or exerting an undue influence, it could be a sign of elder financial abuse.
If advisors suspect that such abuse is occurring, they need to ask the tough questions. When a client requests unusual transactions, the advisor should ask what they are for, Long says. If a client is being isolated by a family member or caregiver who appears to be directing financial decisions, the advisor needs to get the client alone and find out if he or she agrees with the decisions.
And when a client asks for money to secure Costa Rican lottery winnings or some other obvious swindle, the advisor first needs to stall for time. "If it's a huge withdrawal, negotiate," Long says. "'Can we have this transaction go later? Maybe I can see if I can get a check for a thousand out today and then we'll come back two days later.' Time is your ally because the hope is that at some point you can get some other responsible family member to get engaged."
Finally, the advisor may need to alert the authorities by filing a suspicious activity report through the Financial Crimes Enforcement Network, informing adult protective services or alerting law enforcement. "If it's urgent, literally call the police," Long says.
A Firm Approach
On a firm-wide level, advisors need to develop long-term strategies and practices to confront elder financial abuse. Recognizing the scope of the problem and the troubling trend lines, Wells Fargo devised a comprehensive five-pronged approach. They set up a centralized unit in St. Louis staffed with experienced professionals to deal with the cases that come up and started an advisor education program to teach the warning signs and the steps advisors should take if they suspect elder financial abuse is occurring.
Educating their clients and their loved ones about the problem is another part of their strategy. They also formed partnerships with NAPSA and other groups that work to protect the elderly. Building up their institutional knowledge base is also critical.
"As a firm, we're trying to get more education for ourselves," Long says. "We know our stocks and bonds and securities very well, but we're starting to attend events like the National Adult Protective Services Association Annual Conference."
Wells Fargo's initiative is well-timed. Not only is elder financial abuse growing, but it's becoming harder to recognize. "The cases are getting more complex," Capehart says.
Long and his team are preparing for a growing deluge of elder financial abuse cases in the years ahead. Long recommends that all financial services professionals do the same. "It is coming," he says. "This is a wave that will get larger and we need to all start taking steps now to combat it.
