A difficult issue to define is how financial abuse carries over to either mental or physical abuse of an elder. A recent study published by the National Institute on Aging reveals that impaired cognition affects approximately 20 percent of people aged 85 years or older. Abuse tends to happen when a relative or person in a trust uses an elder’s resources for that person’s own benefit.

One example might be when a son takes control of his 72-year-old parents’ ATM card and uses that card to buy groceries for his children. Likewise, an attorney or financial advisor could be in trouble if the son uses a power of attorney to transfer assets when documents were incorrectly created.
I have seen several red flags in my practice, including sudden, atypical large withdrawals directed to an unknown account. In our local area we had a predator who would knock on an elder’s front door and say the chimney was a hazard and should be fixed. This predator absconded with over $600,000 and tried to extract an additional $100,000 as a loan from my client.

Notified by the investment company, I immediately contacted the client to find out what was going on. I then contacted the local district attorney who eventually helped put the person away for a long prison sentence. Other red flags are drastic shifts in investment style, inability to contact the senior customers, signs of intimidation or reluctance to speak in the presence of a caregiver, and isolation from family or friends.

  • There are many things you can do as a producer to avoid trouble:
  • Encourage your firm to designate a specific individual responsible for investigating these issues and who knows what procedures to follow when red flags arise.
  • Find out what your obligations and liabilities are if you identify financial abuse. CAUTION: Do not assume that you should immediately notify outside persons about the situation, as there are privacy issues to consider. Moreover, since – most likely – you are not a psychiatrist; you’re not qualified to make these types of judgment calls. Instead notify someone immediately, preferably a supervisor.
  • Ask at account opening whether a customer has executed a durable power of attorney, revocable or irrevocable trust.
  • Ask at either account opening, or at a later time, whether your customer would like to designate a secondary or emergency contact.
  • Ask the client to bring his or her children to any appointments you might have.
  • Refuse to perform a particular transaction for a customer if you feel it is not appropriate.
  • Keep client information current so you can better assess their ongoing needs.

To help you understand more about these and other issues and for valuable training, FINRA maintains a database at www.finra.org. Another great resource is Tom Orr, with Senior Insurance Training. Orr’s website is www.ltcce.com .