Every day, 10,000 Baby Boomers celebrate their 65th birthday—what used to be a minority population is rapidly overtaking previous generations to become the largest segment of our country’s demographic. It should come as no surprise then that the instances of reported cases of financial exploitation and abuse of seniors increases each year. It is becoming increasingly important to train our insurance agents and financial advisors on the red flags of financial exploitation to protect our seniors from harm.
Whenever financial exploitation is mentioned, most people jump to the idea of hackers forcing their way into an unsuspecting victim’s bank account. While that’s an issue in and of itself, that’s not the root of this growing problem. Financial exploitation is fraud, theft, and/or abuse of senior and vulnerable clients and their personal finances, and financial professionals have quickly become the first line of defense in detecting these cases.
An alarming report from the CDC indicates that senior financial exploitation is one of the most grossly under-reported crimes, with 44 cases going unreported for every one that comes to light.
As illustrated by Stephen Dean from the U.S. Securities and Exchange Commission,
“If a new disease entity were discovered that afflicted nearly 1 in 20 adults of their older lifetimes and differentially struck our most vulnerable sub-populations, a public health crisis would likely be declared...data suggests that financial exploitation of older adults is such a phenomenon.”
Victims are targeted for a number of reasons. First, consider the size of the purse—nearly three-fourths of this country's wealth is controlled by individuals who are 50 and older. Not all “seniors” are victimized, but as people age, certain physical, mental, and emotional changes take place that make this group more vulnerable to mistreatment.
The system of laws and protections in place certainly help keep at-risk clients safer than they would otherwise be, but consider those 44 unreported cases. How many of those cases could have been prevented had any of the people close to the victim—a friend, neighbor, bank-teller, insurance agent, financial advisor—been trained to recognize the signs and report suspicions? State governments have adult protective services programs in place to protect seniors and adults with developmental disabilities. Certain professionals are legally required to report any suspicions of abuse, neglect, or exploitation involving a vulnerable adult to these protective services. In most cases, this includes those working in financial services. How many insurance professionals know these rules?
What about federally? The Senior Safe Act was enacted in 2018 to provide immunity to certain employees and associates of financial organizations in a national effort to encourage more people to speak up and report financial abuse suspicions. Insurance professionals and registered financial advisors are specifically included in this legislation, as a first line of defense to prevent exploitation before a loss takes place.
Without training, it can be rather difficult to recognize signs of diminishing mental capacity, as well as signals of exploitation taking place. Training is needed early and often.
Here is a snippet from the A.D. Banker course of one area where training can help:
Certain warning signs have been identified when an individual might not be able to make informed financial decisions or may be suffering from some degree of diminished capacity. If advisors notice such behavior, caution should be observed, and more questions should be asked and answered before making a sale.
Because advisors are typically not medically trained, it can be difficult to be certain that a given client lacks (or has lost) mental capacity. The following behaviors represent red flags that might signal to advisors that both diminished mental capacity and cognitive impairment might exist:
Inability to participate in a logical, extended conversation
Discontinued interest or participation in current events, normal routines, and favorite activities
Unusual depression or subdued personality
Unexplained weight loss
Declining personal hygiene and/or grooming habits, wearing inappropriate or soiled clothing
Uncharacteristically poor housekeeping
Inability to remember financial transactions or the steps to conduct them
More education is the key to detection and prevention!