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March 12, 2020 at 01:43 PM
Financial fraud against the elderly continues to take its toll and it is mainly an emotional one, according to a recent survey of CPA financial planners by the American Institute of CPAs.
Sixty-eight percent of survey respondents said the stress and emotional effect on older Americans who fall victim to such fraud outweighs the financial one, compared with only 16% who saw the opposite result. One percent said it had no effect.
Forty-five percent of financial planners said the financial effect of fraud was likelier to be minimal than substantial, versus 32%.
Survey participants said these were the types of financial abuse or fraud their elderly clients had experienced:
- Phone or internet scams
- Inability to say ‘no’ to relatives
- Identity theft
- Support for non-disabled adult children
- Credit card theft
- Being taken advantage of by an in-home caregiver
At the same time, the survey found that CPAs were seeing their clients victimized by many of these scams at lower levels than they were in 2015.
“Everyone is vulnerable to financial abuse and exploitation,” Susan Tillery, chair of the AICPA’s PFP executive committee, said in a statement. “However, the elderly are highly susceptible because companionship is an enticing allure for them.”
Tillery said that when someone an older person depends on for companionship abuses that trust, he or she can be emotionally distraught and withdraw from family and friends.
“One of the challenges specific to working with the elderly that CPA financial planners encounter is assessing their elderly client’s desire to provide financial help for a family member, against their own continuing financial needs,” she said.
The AICPA’s online survey, which was conducted from Nov. 26 through Jan. 20, included responses from 688 CPA financial planners.
Diminished Capacity
The survey also found that 48% of all CPA financial planners had a client who had exhibited signs of dementia or diminished capacity for the first time in the past year.
The AICPA said this underscored the need for Americans and their financial planners to understand how to address these issues together, particularly at a time when Americans are living longer.
“As the trusted advisor to my clients, I am especially cognizant of mental capacity, and specifically with elderly clients, symptoms of the early signs of dementia,” Tillery said.
“At times such as this, it is essential to be proactive by having a plan in place to deal with the financial demands of long-term care and other medical expenses associated with diminished capacity.”
Awareness of the effect of aging on cognitive function may be increasing, but 28% of CPA financial planners said their clients planned to deal with diminished mental capacity in retirement on a reactionary basis, and 20% reported that clients were simply ignoring the issue.
Only 17% said their clients were taking proactive measures.
How are financial planners addressing the potential of diminished capacity in retirement?
Ninety-two percent of respondents said they were doing so by ensuring that powers of attorney and health care proxies were in place, and 66% had arranged for themselves to contact their clients’ other professionals and relatives.
About four in 10 had obtained authorization to contact a client’s attorney or move money to a trust, a third had automated clients’ annual required minimum distributions from qualified retirement accounts and a quarter had had clients move into a previously selected assisted care facility.
