The financial industry has reported that senior financial exploitation is estimated to cost savers almost $3 billion per year and that 1 in 44 cases is actually reported. Additionally, recent scientific studies have shown that financial decision making is often one of the first cognitive functions to decline 

The U.S. Consumer Financial Protection Bureau reports that during the period between 2013 and 2017, seniors (over age 70) lost an average of $41,000 due to elder financial exploitation 

That same report found that average losses are even higher when the scammer is a friend or relative. Seniors targeted by strangers lost an average of $17,000, while those scammed by someone they know lost an average of $50,200.The brokerage industry has put some safeguards into place to protect elders or mentally incapacitated customers from financial exploitation.

The Financial Industry Regulatory Authority (FINRA) allows broker-dealers to put a hold of up to 15 days on the disbursement of funds from seniors’ accounts if they believe that an individual is being financially exploited. Another recent attempt to prevent elder abuse is “trust contact” forms. Firms are now required to ask their retail clients to provide the name and trusted contact and provide information for a person who can be contacted in the event of suspected financial exploitation.

The 2018 Senior Safe Act protects brokers and their firms from liability when reporting possible exploitation to the authorities. This federal law protects covered investment professionals from liability where that person reports on the potential exploitation of a senior (defined as not younger than 65 years) to a covered agency. The immunity established by the Senior Safe Act is provided on the condition that (1) certain employees receive training on how to identify and report exploitative activity against seniors before making a report, and (2) reports of suspected exploitation are made “in good faith” and “with reasonable care.”  

To help advisors detect elder financial abuse, the Securities Industry and Financial Markets Association (“SIFMA”) released a senior investor protection tool kit that helps financial professionals detect the signs of undue influence, power of attorney abuse, and other fraud. 

These regulatory protections are helpful to prevent and detect fraud, but there are additional steps elder investors can make to protect themselves and their loved ones.  

Create a durable power of attorney. A durable power of attorney allows the investor to assign someone to oversee their finances in the event they’re incapacitated.

Create a revocable trust. A revocable trust can be established so that in the event of incapacity a co-trustee can help pay bills and protect assets.

Discuss responsibilities with family. While it may be difficult, it is helpful to have discussions with relatives so that they are well aware of what accounts exist and who will be responsible in case of incapacity. If a trusted contact is designated, tell that person and let them know what bills they will be required to take care of. You might also consider having a trusted relative receive duplicate statements online or via email so they know what is happening in the account.

You also can help your elderly relative or friend protect themselves from investment fraud. The Securities and exchange commission (“SEC”) has identified red flags for detecting fraud as well as common persuasion tactics that underly investment fraud. The SEC has published these following warnings to investors.

Red Flags For Fraud And Common Persuasion Tactics

If it sounds too good to be true, it is. Watch for “phantom riches.” Compare promised yields with current returns on well-known stock indexes. Any investment opportunity that claims you’ll receive substantially more could be highly risky – and that means you might lose money. Be careful of claims that an investment will make “incredible gains,” is a “breakout stock pick” or has “huge upside and almost no risk!” Claims like these are hallmarks of extreme risk or outright fraud.

“Guaranteed returns” aren’t. Every investment carries some degree of risk, which is reflected in the rate of return you can expect to receive. If your money is perfectly safe, you’ll most likely get a low return. High returns entail high risks, possibly including a total loss on the investments. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are “guaranteed” or “can’t miss.” They try to plant an image in your head of what your life will be like when you are rich. Don’t believe it.

Beware the “halo” effect. Investors can be blinded by a “halo” effect when a con artist comes across as likable or trustworthy. Credibility can be faked. Check out actual qualifications.

“Everyone is buying it.” Watch out for pitches that stress how “everyone is investing in this, so you should, too.” Think about whether you are interested in the product. If a sales presentation focuses on how many others have bought the product, this could be a red flag.

Pressure to send money RIGHT NOW. Scam artists often tell their victims that this is a once-in-a-lifetime offer and it will be gone tomorrow. But resist the pressure to invest quickly and take the time you need to investigate before sending money.

Reciprocity. Fraudsters often try to lure investors through free investment seminars, figuring if they do a small favor for you, such as supplying a free lunch, you will do a big favor for them and invest in their product. There is never a reason to make a quick decision on an investment. If you attend a free lunch, take the material home, and research both the investment and the individual selling it before you invest. Always make sure the product is right for you and that you understand what you are buying and all the associated fees.

Protect Yourself – Get an Investor Fraud Lawyer to Represent You or Your Family

If you or a loved one has been the victim of investment fraud, then you need an experienced, aggressive securities fraud attorney to zealously pursue your case against the perpetrators. We invite you to contact securities attorney Melanie Cherdack.    

Because she has been in the trenches as a former Wall Street attorney, investor fraud lawyer Melanie Cherdack and her team of experienced attorneys have seen just about every type of investment fraud or investment loss. While almost every investment carries a degree of uncertainty and risk, you may have been unnecessarily exposed to such risk due to the actions of others.  

If you have lost money due to investment fraud or simple broker negligence, it is crucial to hire a lawyer who fully understands this area of law. Former Wall Street securities attorney Melanie S. Cherdack represents individual and institutional investors who are unwitting victims of investment fraud and broker negligence. She heads up a group of attorneys who represent investors across the United States. Contact us by filling out our online contact form, or calling 888-768-2499.