Every day at least 1,000 elderly Americans are financially exploited or abused.
I heard this appalling statistic from Kathy Greenlee, assistant secretary for aging at the U.S. Department of Health and Human Services. Speaking at a day-long event sponsored by Women for a Secure Retirement, Greenlee (who also heads DHHS’s Administration for Community Living) challenged participants to help her curb the terrible prevalence of elder abuse.
According to the National Center of Elder Abuse, part of the U.S. Administration on Aging, financial or material exploitation is defined as the illegal or improper use of an elder’s funds, property or assets. Examples include cashing an elderly person’s checks without permission, forging an older person’s signature, misusing or stealing an older person’s money or possessions, coercing or deceiving an older person into signing any document (e.g., contracts or wills) and the improper use of conservatorship, guardianship and power of attorney.
Greenlee’s call to action prompted me to ask her for more information about her campaign against abuse and to learn how advisors can better protect their older clients.
Olivia Mellan: How big is the problem?
Kathy Greenlee: Researchers estimate that about one in 10 older adults is abused. We know that the number who are being financially exploited is greater than that. Most experts in the field believe that closer to four out of 10 older people are financially exploited.
This sobering statistic also reveals that only a small percent of cases are ever reported. Studies estimate that somewhere between 14 and 24 cases are undetected for each case that is reported.
Anyone who works with older clients can help stop abuse. Knowing the risk factors and red flags is key to identifying possible abuse. (See “10 Signs of Financial Exploitation,” ThinkAdvisor.com.)
OM: What is the most common financial abuse scenario?
KG: When people hear “elder financial exploitation” they often think of Internet scams or phone schemes. Scams and other forms of fraud committed by strangers certainly exist, but the vast majority of elder abuse cases—about 90%—are perpetrated by family members, most often adult children and spouses, or by lawyers, bankers, financial advisors and other professionals trusted by the elder.
OM: Who is most vulnerable to financial abuse?
KG: Both men and women can be targets. People who are at highest risk for abuse—whether financial, emotional or physical—are those with disabilities or cognitive decline, such as early-stage Alzheimer’s disease or other dementias. Executive function is the first impairment when cognitive decline begins, yet executive function is exactly what you need most when making financial decisions. Around half of all people with cognitive decline reported being mistreated by caregivers, according to a recent study.
Social isolation is the second big risk factor. That doesn’t mean living by yourself; abuse can happen in any setting, at home or in a long-term care facility. Isolation means that the older person’s social world has shrunk—they no longer spend time with their family, neighbors, faith community, whatever their social network may be. People who are socially isolated are at much higher risk for exploitation. Abusers often attempt to control communications between the person they are exploiting and their support system.
OM: Many elderly clients have adult children who manage their affairs. What should advisors be looking for when interacting with these children?
KG: Abusers often have mental or emotional illness or feel burdened by their role as caregiver. Many times in families, the sense of entitlement exceeds good judgment.
Family caregivers provide support to the majority of our country’s oldest members. They are a tremendous asset and, unfortunately, also a big risk. Caring for an older person can be exhausting, which is why the programs that provide respite to caregivers can be helpful in preventing abuse.
OM: What would you say to advisors who shy away from this sensitive issue?
KG: When someone is being exploited, it undermines their entire life. As a financial advisor, you can help people invest wisely, but if someone steals from them, the life they have planned and worked toward can simply disappear. Their financial goals and all the work you are doing on their behalf can become meaningless almost instantly. Research also shows that elders who are abused are 300% more likely to become ill and die within three years of being abused.
OM: What about violating a client’s privacy or other regulations if an advisor asks too many questions?
KG: Reporting potential abuse does not violate privacy rights. Eight federal agencies co-signed “Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults” in 2013 specifically to address this concern. (See “Elder Abuse Resources for Financial Advisors,” ThinkAdvisor.com.)
OM: What should advisors do if they suspect a client is being abused?
KG: Report it. If someone is in immediate danger, call 911. If you suspect past or current financial abuse, call the local Adult Protective Services, your state’s long-term care ombudsman if the person lives in a nursing home or similar facility, or police.
When reporting a suspected case, you do not have to prove that abuse is occurring. It is up to the professionals to investigate your concerns. In most states, you can report suspected abuse anonymously. The agency you contact is prohibited from releasing information about you. Your identity will not be disclosed to the alleged abuser or victim.
Financial institutions are required to report suspected abuse in nearly every state, and in a growing number of states and territories, any person who suspects abuse is required by law to report it. As of today, those jurisdictions are Delaware, Florida, Indiana, Kentucky, Louisiana, Mississippi, Missouri, New Hampshire, New Mexico, Oklahoma, North Carolina, Rhode Island, Tennessee, Texas, Utah, Wyoming and Puerto Rico.
OM: How can an advisor spot the difference between a client’s bad investment decisions and financial exploitation by another person?
KG: It is important to ask yourself whether your client is having mild cognitive impairment and if the usual social support has disappeared from this person’s life, because those are big risk factors.
FinCEN, the Financial Crimes Enforcement Network of the U.S. Treasury, offers specific red flags for financial professionals to watch for. Among them are changes in spending or investment patterns—shifting from blue chip to penny stocks, for example; erratic or unusual transactions, such as frequent or large withdrawals, or closing accounts without regard to penalties; lack of knowledge about his or her finances; giving a power of attorney to a new person; unusual fear of or submissiveness toward a caregiver; or a sudden reluctance to discuss financial matters.
OM: What else should financial professionals know about elder abuse?
KG: People who are 85 or older are the fastest-growing segment of America’s population. To give you an idea of the steepness of this increase, in 2010 there were 5.8 million people aged 85 or older. By 2050, it is projected that there will be 19 million people in this age group.
As we age, our world becomes smaller. If someone becomes completely isolated from their family, their faith community and their neighborhood, someone can easily come in and take advantage of them. This is when you see the sweetheart scams: people befriending the older person. They may join phone calls or accompany them to appointments, saying, “I’m their best friend now.”
Financial exploitation is the most frequent form of elder abuse, and it’s only going to get worse. Two areas of focus are important: prevention and response.
I call on financial advisors to be part of the solution. Besides developing your own expertise so you can serve your clients better, join—or start—efforts in your community and state to build support systems for victims of financial exploitation and other forms of abuse. The key to supporting older people who are being abused is creating multidisciplinary support systems. Your expertise in finance will be appreciated by the law enforcement and aging experts who are working on these issues.