All Articles Finance Challenges remain in protecting senior investors, panelists say

Challenges remain in protecting senior investors, panelists say

Panelists say Senior Safe Act, FINRA rules help in combating issue

3 min read


Challenges remain in protecting senior investors, panelists say


Strong efforts are being made throughout the financial services industry to combat the rise of elder financial abuse, but more work can be done, panelists at SIFMA’s Annual Meeting said.

Elder financial exploitation is the fastest growing type of elder abuse worldwide, and it’s hardly limited to the infamous Nigerian prince emails or similar scams performed by outside fraudsters that get attention in the media. The unfortunate truth of elder financial abuse is that it is mostly committed by people close to the victims who hold their trust, says Judith Kozlowski, an expert in elder justice matters.

“The statistics say that it’s probably over 50% from family and another 20% from ‘trusted others,’” Kozlowski says.

Those “trusted others” can be anyone who has access to the private dealings of older adults, Kozlowski says, including lawyers, caregivers, bank employees and even hairdressers.

The full scope of the problem is uncertain. Studies have placed the extent of elder financial abuse in the US to be as low as $3 billion or as high as $40 billion. However, Kozlowski contends it is likely considerably higher than that, as research has shown only about one in every 44 elder financial abuse cases gets reported.

“Part of the problem is, in this field and in life, that older adults and families generally don’t want to report elder financial exploitation because of shame, because of loyalty, because of guilt, because of lots of other personal reasons,” Kozlowski says.

While the issue remains pervasive, regulators, lawmakers and industry groups are working to empower financial professionals to better address it.  A pair of Financial Industry Regulatory Authority rules and legislation aimed at protecting senior investors, all enacted in 2018, have allowed industry professionals more latitude in helping safeguard their clients, the panelists said.

FINRA Rule No. 4512, which requires firms to request a client provide them with a trusted contact, has helped financial advisors root out who in a client’s inner circle can credibly speak to their best interest. While FINRA Rule No. 2165, which permits them to delay action on suspicious activities, has allowed them extra time to determine whether such activities are in the client’s interest.

“The bad guys hate delays,” says Ronald Long, senior vice president and head of elder client initiatives for Wells Fargo Advisors. “If you can slow it down, they leave that potential victim and move to another. But if I have to send it out within a short period of time, that’s a win for the bad guys and not the client.”

The Senior Safe Act, which was included in the Economic Growth, Regulatory Relief and Consumer Protection Act, has also been a big help by curbing financial professionals’ liability in reporting exploitation to covered agencies, such as Adult Protective Services.

However, while all 50 states have APS agencies, the way they are administered can vary state-by-state. This can make reporting such matters challenging, especially for a national firm with clients all over the country, Long said.

A pilot project to establish a centralized portal that helps firms identify the appropriate agency to report to for a given client is currently underway, noted Lisa Bleier, managing director and associate general counsel for SIFMA, which is backing the project.

Bleier also strongly encourages firms to refer to SIFMA’s free Senior Investor Protection Toolkit, which includes resources to help identify signs of cognitive decline in clients, red flags for instances financial exploitation and background materials on a variety of common scams.