Protecting Seniors from Financial Fraud

On February 5, 2019, FINRA (a not-for-profit, self-regulatory agency authorized by Congress to protect the integrity and fairness of the “broker-dealer” industry) issued a new rule requiring brokers to ask their customers to submit the name of an additional personal contact to verify suspicious financial transactions.

The new rule is not meant to limit a client’s ability to control their finances or have access to their funds; but rather, it’s to protect elderly family members from financial fraud.

Elder abuse in the form of fraud or mismanagement is a serious problem in the United States, affecting millions of seniors. According to Consumer Reports, senior Americans lose more than $30 billion per year as a result of financial abuse. Not only is this a new problem facing older Americans, but it is a growing problem among all age groups.

Five years ago, North American Securities Administrators Association mandated that “both brokers and financial advisers report suspected abuse of the elderly or other vulnerable adults, such as those with disabilities, to state authorities.” The rule goes so far as to allow them to stop withdrawals from affected accounts.

Right now, a bi-partisan bill called the Senior Safe Act is currently making its way through Congress to further address this growing problem at the federal level. However, all of the regulation currently on the books still is not enough to protect everyone, everywhere, every time, which is why it is important that seniors add more safeguards of their finances.

Consumer Reports suggests three simple steps you can take now to put  seniors on the right track for more financial security:

  1. Start talking about money. Don’t be afraid to find out how your family member(s) is handling their finances.
    • Are bills being paid on time?
    • Are account balances where they should be?
    • Are there any risk factors you need to be aware of like new friends or ‘get rich quick’ schemes?

    It is difficult to get anyone to open up about their finances, so don’t try to force it. The idea is that you’re offering assistance, not trying to take control. Make sure this message comes across gently.

  2. De-clutter their finances. That means doing away with multiple savings/ checking/investment accounts. For the sake of simplicity, suggest that your senior friend or family member consolidate the accounts into something which can be managed easily;  either by them or having a trusted friend or professional do it for them.
  3. Institute safeguards. A will, power-of-attorney and healthcare proxy are documents that should be in place and secure BEFORE they are needed.

There is no magic shield to protect your eldest family members or friends from financial fraud. But by taking a few simple steps, you can ensure better protections for now and in the future.

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