Financial Advice for Retirement, Social Security, IRAs and Estate Planning

How Seniors Can Better Protect Themselves from Financial Fraud

Many believe that Wall Street and the financial services industry exist primarily to siphon money from people through high fees, excess trading, complicated products and other means.

But a significant segment of the financial world is working to protect seniors from being abused or conned…

And new rules are helping the change.

In fact, in many cases it’s brokers and financial advisors who can help save you from scams or financial abuse.

The shift began a few years ago when financial regulators decided to focus on providing more protection for the many Americans who are living into their advanced years.

Studies and data made it clear that this is the group most likely to be targeted for and victimized by scams and that there weren’t adequate protections and forms of redress.

In the past, financial professionals generally were not proactively defending clients from scams and financial abuse.

It often was considered a violation of a person’s privacy for a firm to identify investments and financial transactions that should be questioned.

Firms also didn’t want to insult older clients by second-guessing their decisions.

But regulators determined that brokers and other financial professionals are the first and best line of defense for many seniors.

New rules issued in 2015 make it easier for financial firms to protect seniors, and regulators encouraged firms to put protections in place.

One of the new rules encourages brokers and other financial custodians to ask account holders to identify one or more “trusted contacts” who can be alerted when the firm thinks there is a suspicious transaction or series of transactions or is concerned about cognitive decline in the client.

In addition, firms can place temporary holds on disbursements of funds or securities from accounts when they have a reasonable belief financial exploitation might be occurring.

Many firms now have in place technology and procedures that identify older clients and alert the firm to any unusual transactions.

Financial firms aren’t required to do this monitoring or take any actions. The rules provide safe harbors, so firms can act to protect clients without fear of adverse legal consequences.

Now, about 90% of brokers have a dedicated team or process for addressing senior issues.

About 95% of firms provide employees some type of training related to senior issues, such as how to recognize signs of elder financial abuse.

And 94% have a process for employees to report concerns that a client has diminished capacity or is subject to financial abuse, according to a recent survey by the North American Securities Administrators Association (NASAA).

These practices and rules don’t apply to only full-service brokerage firms.

Many discount brokers have protections in place for seniors, as do many mutual fund firms.

The Financial Industry Regulatory Authority (FINRA) also established a toll-free senior help line (844-57-HELPS) that seniors, or anyone concerned about a senior, can call with concerns about financial accounts.

FINRA has dedicated employees who answer the calls and will initiate action when transactions raise concerns.

The NASAA said that in 2015, 61 broker-dealers reported more than 2,300 cases of suspected senior-related fraud to authorities. About 45% of the cases involved clients ages 81-90. Many of the cases were of guardian abuse, so 62% of the cases were reported to adult protective services.

More than half of the cases were attempts by family members or third parties to access accounts or other funds of the clients.

In some cases, an attempt is made to change the beneficiary of a client’s IRA or other accounts.

It is established that cognitive ability declines after age 35 or so, and seniors are more trusting than other generations.

We all need safeguards against fraud and financial abuse as we age.

You should carefully consider whom to designate as your trusted contacts with your financial firms.

Also, ask your broker and other financial firms which policies and procedures they have in place to limit the probability you’ll be harmed by a scam or financial abuse.

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