By Jennifer R. Figurelli, CTFA
Financial exploitation of senior citizens is a profitable business. According to the Life Care Planning Law Firms Association, financial exploitation costs seniors nearly $36 billion per year. Recent AARP statistics revealed that only 20% of financial scams are reported, and 1 out of 5 people over the age of 72 will be exploited within the next year.
I recently attended a webinar hosted by the Professional Fiduciary Council of SW Florida, presented by Shannon Miller, Esquire, an attorney in Gainesville, Florida who specializes in elder law. Ms. Miller discussed the characteristics of individuals who are susceptible to financial exploitation, how to recognize the red flags of undue influence, and how professionals like us can educate, inform, and protect our clients and loved ones.
Recent advances in brain science show that there is scientific evidence that differentiates between incapacity and exploitability; thus, they are not the same. The challenge is that many legal and financial professionals are trained to recognize incapacity, but not exploitability.
Bonnie E. Levin, PhD, is a Professor of Neurology at the University of Miami, who presented on November 15, 2019, at the “Stopping Financial Exploitation-Florida on the Forefront” conference in Gainesville, FL. Dr. Levin stated that the exploitable brain loses its ability to assess the risks and benefits of making a financial decision due to a thinning of the cortical insula in the human brain, and this typically occurs 10 years before someone becomes fully incapacitated. Thus, while this person may have excellent memory, they don’t have sufficient information to recognize a scam.
Dr. Levin’s study revealed that people who are susceptible to exploitation are those who are age 55 and older, risk takers, overconfident investors, financially vulnerable, have sensory impairments (auditory, visual), increased trusting behavior, lonely, and may be under high levels of stress. The demographics are as follows: 69% are female, 40% live alone, 47% have an education at graduate level, and 80% are social media users/computer literate. What is also interesting is that 25% have stated that they never have been a victim of a scam, yet 55% answered “yes” when asked if they had a friend who had been a victim of a scam. Thus, these people have a tendency not to admit being scammed.
Scammers typically use two methods often in combination to financially take advantage of people: 1. Internet/Phishing Scams, like “I need access to your computer, etc.” and 2. Telephone Scams. As for internet/computer usage, scammers intentionally put errors in emails to determine if someone can tell the difference between a legitimate website and a scam website (ex. www.IRS.gov versus www.IRS.com. Eventually the filter gets smaller and smaller, to the point where the scammer gets a person’s address and phone number. Then the phone calls start. Ms. Miller said that the value of a victim’s information on the Dark Web increases the longer they spend on the telephone talking to a scammer. This is because the victim’s deficits (mental capacity, level of vulnerability, etc.) are revealed so the scammer has a good insight as to whether the victim can tell the difference between a truth versus a lie.
What protective actions can be taken to prevent someone from being a target of financial exploitation?
- Adding the telephone number to The Do Not Call Registry
- Background checks on all home/health caregivers
- Name someone you trust as your financial power of attorney
- List a “Trusted Contact” on your financial accounts
- Enroll in a service that tracks your spending and alerts to suspicious activity in your bank, investment, and credit cards.
- Keep a “Need to Know” file (a file that our firm creates for our clients with key information) current and in an accessible place, so it is available for reference when needed.
- Hire a professional to act as an intermediary to oversee your financial matters, such as auditing/reviewing your monthly banking and credit card statements.
As a fiduciary, Andrew Hill Investment Advisors, Inc. is obligated to act in the best interest of our clients. We recognize that if an existing or prospective client suffers from diminished mental capacity, they may lack the ability to make knowledgeable and prudent financial decisions. Our firm has policies in place to identify red flags indicative of financial abuse of a vulnerable client and to take such actions as are reasonable and appropriate to involve the client’s representatives and or the proper authorities to protect such clients from financial harm.
For more information and resources on this topic, please visit the following websites:
The Aging Brain: The Reason Seniors Are Most Vulnerable To Scams – The Miller Elder Law Firm
UCF Developing Scam Screener for the Elderly | University of Central Florida News