Dealing with Seniors Preying on Seniors
The silver generation is where the money is. That’s why seniors so often are targets of scams and why one estimate says one of five of those over 65 have been scammed one way or another.
What many seniors don’t realize is that a potential scammer is likely to be a contemporary. In more and more cases, scams involve someone over 65 conning someone else over 65. You still need to beware of the younger, slick huckster, but your antennae also need to be sensitive to the possibility that a friendly, understanding cohort doesn’t have your best interests at heart.
Examples abound. Bernie Madoff was 70 when he was caught, and many of his investors were people he befriended at his clubs or in other social situations. In the last two years, an 84-year-old Texas man was sentenced to five years in prison for scamming $100,000 from other senior citizens; a 74-year-old many was sentenced for taking $2.6 million he promised to invest; and a 68-year-old Tennessee financial advisor sold fake promissory notes to elderly members of his church.
It’s easy to see why seniors are targets. In addition to having money, they tend to be trusting (especially of a contemporary), can be isolated, and have diminished capacity. Studies show that even healthy, able seniors have reduced cognitive skills where finances are concerned. Of course, many financial strategies, even good ones, are complicated these days. Seniors make good con artists because they know the needs and fears of other seniors.
Financial frauds fall into two broad categories: outright frauds and inappropriate financial strategies. Even a legitimate strategy can be a scam when it is sold to someone for whom it is inappropriate. A financial scam doesn’t have to be an investment. It can be the purchase of an insurance contract or anything that involves your transferring money to someone else.
Some simple actions can dramatically reduce the odds of your being taken by another senior or anyone else.
l Be skeptical. That means asking a lot of questions and not taking an action you don’t fully understand. It’s better to miss an opportunity than get roped into a scam.
l Don’t rush. You should be alarmed when someone pressures you to act quickly on any financial opportunity. When you are told that there isn’t time for you to think about it or talk it over with others, consider that the same as being told it’s not legitimate.
l Seek multiple counselors. You don’t need to hire several financial advisors, but you do need several knowledgeable people to chat with. These could be friends or relatives (including your adult children).
l Don’t be embarrassed to ask. Studies show a reason many seniors are conned is they’re afraid to ask the opinions of others, especially their families. They’re concerned that they’ll appear unable to handle their finances and will lose their independence. The truth is seeking advice and help from others shows someone is being smart.
l Have checks and balances. A good idea is to have copies of your financial statements (bank accounts, credit cards, investment accounts) sent to a second party you trust, such as an adult child, professional advisor, or good friend. They can review the statements for any unusual transactions. Then, they can ask you about them.
Most investment frauds occur only because there aren’t any checks and balances. For example, Bernie Madoff retained custody of clients’ investment funds, so he could spend the money however he wanted and send statements saying whatever he wanted. On the other hand, the portfolios I manage for clients through TJT Capital use Charles Schwab & Co. as the custodian. Schwab holds the assets and sends statements and reports directly to the clients. TJT Capital has limited ability to make trades within the account and none to take money out.
l Beware senior specialists. There are several designations purporting to identify people as experts on senior financial issues. The requirements to receive them generally are weak, and some people make up their own designations. Ignore them. Pay attention only to long-established credentials.
RW January 2011.
