With more and more seniors losing their savings to fraudsters, regulators say advisors have both a professional obligation and financial incentives to protect elderly clients.
Representatives of the Securities and Exchange Commission, the Financial Industry Regulatory Authority and other agencies attended a
"There is an incentive to maintain these assets," Wrona said. "We don't want them stolen by fraudsters. Of course, the concern, it's also genuine."
According to investment management company Vanguard Group's
Recent figures suggest this will be a population particularly susceptible to fraud. The Federal Trade Commission, which enforces consumer protection laws,
Anne Mank, the director of financial planning at Rockford, Illinois-based Savant Wealth Management, said she and her colleagues see their fair share of clients coming in to ask about questionable emails or to report that they had responded to something that maybe they shouldn't have. She said advisors at Savant are trained to look for warning signs. Fraud isn't always involved. An advisor might have reason to raise questions about mental competency if a client, say, seeks to take $10,000 out of account without seeming to remember having done the same thing the day before.
"Or if our client is asking for $50,000 and they had previously talked about how they weren't going to take money out this year, you can at least ask: Why are you going to do that?" Mank said.
She acknowledged that clients have final say over their money. Financial professionals, though, do have some means at their disposal to try at least to mitigate harm. She said advisors should be encouraging clients to take advantage of a
"If we don't have that trusted contact, it is very hard to stop something when it's started," Mank said.
Fiduciary duty?
Although most advisors are likely to feel an ethical obligation to protect elderly clients from fraud, it's not so clear that they are bound to do so by their fiduciary duties. Knut Rostad, the president of the Institute for the Fiduciary Standard, a research institute, said the fiduciary responsibility calling on advisors to place clients' interests mainly applies to the relationship between an advisor and a client. So the water gets murky when fraud is being perpetrated by someone outside that relationship.
"Of course, if you're working with Mr. Smith, who's 90, and you see from his accounts that funds are going somewhere and you have no idea where, and Mr. Smith himself can't explain, there is definitely an ethical obligation to do something," Rostad said. "But, in that scenario, there's a big question if that's part of your fiduciary obligation."
Widespread underreporting
The FTC found in its latest report that not only are older Americans less likely than young ones to report incidents of likely fraud; they are more likely to report the loss of larger sums when they do go to the authorities.
Richard Szuch, the chairman of senior issues and diminished capacity committee at NASAA — which represents state regulators through the U.S. — said elderly investors can be hesitant to come forward. Many fear they'll be made to feel foolish or that they'll be deprived, perhaps by concerned relatives, of control over their money. FINRA and the AARP released a
"I think we all know now that blaming and shaming people is not the best way to treat people who are in a bad spot," he said.
Pig butchering
With the COVID-19 pandemic having left many people feeling lonely and isolated, the elderly were particularly susceptible to scams involving faked romantic interest. Many of these schemes also have a tie to cryptocurrency or other often poorly understood investment opportunities. One type of scam, known as
NASAA warned in its
Suzanne McGovern, a senior advisor at the SEC, said there has also been a rise in scams involving
Ways to prevent fraud
Wrona said there are a number of steps advisors and other financial professionals should be taking to prevent and mitigate fraud. One is to simply stay in touch regularly with their colleagues and let them know of any new scams they might have read about or even encountered in their own work with clients.
And clients who haven't designated a trusted contact should be encouraged at every opportunity to do so. Of course, Wrona conceded, the rule does little good at times when the person designated as the
"It really is common sense," Wrona said. "If you suspect the trusted contact is involved, then you don't use it."
The SEC also approved a
Szuch noted that NASAA and state regulators offer training initiatives such as the
"Put in a little bit of time," he said. "Because a little bit of training goes a long, long way."