Financial advisors play a major role in preventing fraud and elder exploitation — but they need to defer in certain situations to their firms’ bulked-up teams and systems, according to experts.
Wealth managers and advisors at firms such as Wells Fargo Advisors, Morgan Stanley, Fidelity Investments, Commonwealth Financial Network and Lincoln Investment must work in tandem to reduce
The more than a half dozen experts stopped short of assigning blame for any particular cases that
For instance, the differing rules from state to state or even from county to county on which agencies to notify about elder fraud make it important for advisors to alert their companies rather than reaching out directly to authorities, according to Ron Long, Wells Fargo’s director of elder client initiatives.
“Making the report of elder financial abuse to Adult Protective Services many times just begins the conversation,” he said. “Absolutely make it clear: the financial advisor on the scene almost never, ever should be the person picking up the phone calling Adult Protective Services, save for the situation where they should call 911 if there's physical, or in front of them, they see ongoing harm. And that could be worse if they didn't call law enforcement to step in immediately. But you want the centralized team making those reports, doing the background work.”
One place advisors can take more direct action revolves around establishing a “trusted contact” in line with FINRA’s senior exploitation
The task is “very important” and is “certainly a priority of FINRA” as well, said Thomas Mierswa, Morgan Stanley’s executive director of the Branch Advisory Group within the firm’s Legal and Compliance Division.
“Clients many times are reserved about letting other people know about where they have their money, how much money they have,” Mierswa said. “And they're concerned that that line may be crossed, even with the most trusted people that they know they still want to maintain a separate distinction. So we, as with many other firms, are looking at new, creative ways to press that in addition to educating the financial advisors that they must consistently ask the clients about this.”
Advisors and firms should also take extreme care in speaking with possible victims of scams when one emerges in their networks, according to Nancy Heffner, Lincoln’s director of compliance.
“This is an issue of a trust violation, and they're not going to come up and say, ‘oh, thank you so much for letting me know that I was scammed and they took all my money,’” she said. “They are coming from a defensive position because oftentimes they have believed what is being told to them, hook, line and sinker. And so you need to empathize with them and not treat them like they're stupid or an idiot for falling for this scam. Even though it might be a scam that we have heard over and over and over again, they have to be treated as an individual.”
That’s why advisors can often help firms gather information about a possible fraud case by joining their firm’s investigative officials in such discussions, said Heather Murphy, Commonwealth’s deputy chief anti-money laundering officer.
“There are times where it is very beneficial, depending on the relationship, to have the advisor on the call with me or with one of the analysts on my team while you're asking strangers a lot of nosy questions because I think it does help, especially, with that rapport,” Murphy said. “Otherwise we do try to keep our units separate, especially when we're making decisions about transaction holds.”
The high stakes make it important for firms to train everyone on their teams continuously in “the red flags and warning signs,” according to Debbie Noury, Fidelity’s senior director of elder financial investigations.
“If anyone has ever had the experience of someone with Alzheimer's or diminished capacity, oftentimes it is your financial person that identifies it first,” Noury said. “It's not a family member. They’re sometimes too close. They don't want to recognize it. They don't want to see it, right? Oftentimes it is really someone, you know, your advisor or your banker or someone in that space.”
In the vein of boosting the ability of authorities at all levels and multiple kinds of government agencies to work with financial firms, the Department of Justice approved the creation of a pilot program called
“We wish that there weren't so many cases,” Gibson said. “The biggest thing is the increase in collaboration and coordination. I think even one of the benefits that wasn't necessarily apparent on paper was just getting the people from the different agencies and states to get used to working with each other. They may not have known each other before, and now they have kind of an effective working relationship.”
The program will pay off down the road, with an expected increase in the number of cases during the rising equity volatility and inflation this year, according to Szuch.
“We're dealing with the caseload we're dealing with in 2022,” he said. “Is there any doubt that the numbers are going to go up? There's just no doubt. And so anything that can be done to redirect time that would be spent on the process of reporting to the solution-finding in the space is simple elegance, frankly.”
