Much remains unknown about COVID-19, but there is one thing that has been consistent in the data from countries that have been most affected by the virus – senior populations are among the most vulnerable to the virus. In an effort to protect seniors and the population at large, governments have taken extraordinary measures to limit personal interactions, particularly with seniors and other vulnerable populations. However, such isolation can exacerbate another scourge to which seniors are particularly vulnerable: financial exploitation.
In addition to their wealth, seniors often exhibit several characteristics that make them particularly vulnerable to financial exploitation, including isolation from loved ones and various health concerns, sometimes including cognitive decline. Such issues can become particularly acute in times of stress. The substantially increased isolation caused by the spread of the virus and dictated by the government is a fraudster’s ideal scenario, a perfect storm in some ways.
Compounding this issue is the fact that advisers are likely to have somewhat limited access to their elderly clients at this time given the various quarantines, social distancing and other steps taken to protect seniors. Some firms have suspended in-person meetings and are conducting all business remotely. Depending on an adviser’s business model, this can mean everything from a revolutionary change in the day-do-day servicing of clients to business as usual.
Whatever the circumstances, both seniors and financial advisers should be on the lookout for financial exploitation, whether it’s caused by scams or someone closer to a vulnerable client. Regulators including the Financial Industry Regulatory Authority Inc., the Securities and Trade Commission and the Federal Trade Commission have all issued warnings to investors to be wary of scams and frauds associated with COVID-19.
Of course, seniors and their advisers should also be wary of attempts at financial exploitation by those closer at home. Statistics are clear that most financial exploitation of vulnerable adults is done by family members or others with a close personal relationship. Given the economic troubles and market developments caused by the virus, exploiters may view this as the time to act.
Advisers can work to better service their clients’ portfolios by continuing to be on the lookout for red flags indicating possible exploitation. Some examples include the following: • Dramatic or unexplained shifts in investment style. • Unusual transactions. • Sudden withdrawals or changes in amount or the frequency of withdrawals. • Family, friends, caregivers or even new acquaintances who begin to pay extraordinary interest to assets, belongings or accounts. • Suspicious signatures or problems with documents. • Abrupt changes in trusted contact information, beneficiary designations or estate planning documents.
Similarly, advisers should remain mindful of recognized signs of diminished capacity, such as: • Making decisions inconsistent with history or stated goals. • Interest in “get rich quick” schemes. • Inability to understand important or basic aspects of the account. • Memory loss. • Disorientation. • Confusion. • Change in appearance. • Inability to pay bills or multiple bills at the same time, including bouncing checks. • Repeated issues with resetting of online account access passwords.
Fraudsters and those who exploit our most vulnerable populations thrive in times of uncertainty and chaos. And the events of the past weeks are unprecedented. Particularly in these uncertain times, advisers would be well-served to give some thought as to how they might better protect their clients from these threats.
is an attorney with and Taylor Anderson is a law clerk with the firm. Both are members of the firm’s senior and vulnerable investor group, which provides solutions and litigation support for investment advisers, broker-dealers and other financial institutions.