Here are some issues to be aware of – and steps to take – to avoid becoming a target of financial fraud. Some of the worst cases of financial exploitation concern the elderly.
Elder FraudSadly, older adults easily can become targets of financial fraud: sweepstakes and lottery fraud, phishing fraud, phony charitable solicitations, etc. Elders can be approached by phone, email and/or regular mail and can succumb to pressure or blackmail. One warning sign of financial fraud is unexplained checks or bank transfers. Unfortunately, a caring relative or friend only can become cognizant if financial information is discussed or shared. Our culture views financial matters are intensively personal, which doesn’t help matters if you suspect your parent or relative is the victim of financial fraud. A further obstacle may be unwarranted paranoia by an older adult about being “ripped off” – this type of reaction can be an early warning sign of cognitive impairment.
If you’re a concerned adult child, verify if your parent(s)’ estate documents are relatively recent or out of date. Do they give you (or your siblings) Power of Attorney to oversee financial matters for your parent(s) at all times? Or only when incapacity is proven? If you have siblings, discuss your concerns with them to avoid any whiff of misunderstanding. If you assume check-writing and responsibility for other financial matters, keep accurate records and provide these to your sibling(s).
What happens if a parent is worried about disclosing financial matters to adult children, or adult children cannot readily monitor their parent(s)’ financial situation because they are far away, lack time, etc? An alternative is hiring a professional bookkeeper (individual or agency) to handle financial matters for your parents. This solution sometimes works well because it takes the emotion out of financial support services.
Financial Elder AbuseUnfortunately senior adults can become a target of elder abuse and fraud by a spouse, adult child or other relative. It’s easy for elder abuse to occur if the elder is afraid of reprisals (e.g. being forcibly placed in a nursing home). According to some statistics, 500,000 to 5 million elders are abused, exploited or neglected each year in the US. These numbers vary widely since elder abuse may be difficult to define and can be hidden. Financial abuse is the most frequently reported type of elder abuse – figuring in nearly 60% of elder abuse cases. Experts say one possible red flag is a family member who becomes angry if he/she isn’t given Power of Attorney or guardianship rights. Financial advisors may be one line of defense if they communicate concerns about a client’s cognitive abilities to family members (this issue has to be handled carefully, however, to avoid violation of privacy, etc.).
Investment FraudWith hundreds of thousands of financial advisors in the US, there is a small chance you’ll encounter a rotten apple (fraudulent advisor). It makes sense to have your money where you can see it online 24/7. Bernie Madoff perpetuated his fraud for years by having phony statements typed and mailed to his investors. If you work with independent investors or brokers, your investments are housed at a large brokerage house where you should be able to verify your investment holdings independently of statements your advisor issues to you. Check your monthly statements and verify all withdrawals.
If you’re a qualified investor with unlisted investments (e.g. timber or farmland), confirm you have ample paperwork that specifies clearly what you’ve invested in, how pricing was determined, any lock-up period, procedures for redemption, etc.
Here’s a website that allows you to investigate advisors or brokers to see if there are any complaints or infractions listed: http://www.adviserinfo.sec.gov/ If your advisor is a Certified Financial Planner (CFP), you can check the www.cfp.net website to see if there is any disciplinary history.
Identity FraudIdentity fraud is a problem all of us potentially face. Here are some simple steps to minimize your risk: 1) instead of signing the back of your credit card, write “ask for ID” and be ready to provide it when you pay by CC. 2) check your bank financial statements regularly. I check my online statements every several days. Several years ago, I noticed a strange $847.53 charge from a vendor I didn’t recognize. Someone in another town in NJ had used my debit card number to purchase $847.53 of “school supplies” delivered to her home. I contested this charge, was credited the amount and hope authorities took action against this fraudster. 3) verify all CC charges each month. I’ve had my CC number restated several times after noticing bogus charges to a car repair shop in Florida, Zappos shoes and other unauthorized charges on my CC 4) invest in a good shredder. Shred all personal financial documents before you throw them away! 5) avoid giving out your social security number whenever possible. If asked for your number on financial forms, list the last 4 digits only.
Technology, greed and our aging US demographics mean financial fraud will continue to locate the weak and inattentive. Make sure you and your family members remain vigilant to financial fraud threats. www.stopfraud.gov is a great federal government resource that lists some of the ways to spot fraud and to avoid becoming a victim.