Advisers on front lines in battle against financia

Game changer /

Elder Financial Fraud

Advisers on front lines in battle against financial abuse of the elderly

As the population ages, more seniors are at risk of becoming victims of financial exploitation

By Christine Idzelis — April 3, 2017

Their loneliness and isolation make them easy targets. They are vulnerable, in need of a helping hand or someone who will pay them some attention. They're easy prey for undue influence, trusting of their perpetrators. Maybe dementia is setting in.

They are the elderly in America, more than 45 million strong, and thanks to the aging of the country's baby boomers — 10,000 of whom turn 65 every day — a fast-growing segment of the population.

Stories of their exploitation are all too familiar. Take the case of Mary Evans, indicted a year ago for allegedly stealing more than $400,000 from three elderly men in New York City.

Ms. Evans, 44, approached her targets in neighborhood restaurants, supermarkets or coffee shops, engaging them in a conversation by pretending to recognize them from prior encounters, according to Manhattan District Attorney Cyrus Vance.

According to the charges, Ms. Evans stole more than $130,000 in cash and goods, including a Mercedes convertible, from a 77-year-old retired transit employee. Her second victim was an 81-year-old, retired church musical director from whom she stole $53,000. She obtained a marriage certificate for herself and her third victim, a 73-year-old retired college professor who suffered from dementia, and withdrew $225,000 from his retirement account.

Manhattan District Attorney Cyrus Vance (right) is prosecuting Mary Evans, 44, for allegedly stealing more than $400,000 from three elderly men in New York City by offering them companionship and then defrauding them.


“Companionship came at a high price for the elderly victims in this case,” Mr. Vance said at the time of the indictment.

Although definitive national statistics are hard to come by, one recent study by the state of New York said about 5 million older Americans throughout the U.S. are financially exploited each year. In New York state alone, the number of referrals involving allegations of elderly financial abuse jumped more than 35% from 2010 to 2014, the latest year for which statistics are available.

The financial impact of such abuse is also hard to pinpoint. A 2011 MetLife study estimated the annual financial loss suffered by victims of elder financial abuse to be at least $2.9 billion. A study issued last year by True Link Financial, a financial services firm that helps older adults and their families protect themselves from fraud, put the figure at $36.5 billion. Even at that, most experts believe the problem is significantly underreported. Cases often don't come to light because victims are embarrassed about having allowed themselves to be swindled, or reluctant to point the finger at the perpetrators — often people who are close to them.

“It's a huge issue,” said Judith Shaw, Maine's securities administrator and a previous president of the North American Securities Administrators Association.


Financial advisers are on the front lines of elder financial abuse and are often among the first to spot red flags. Yet they're not always sure how to respond and they worry about the consequences of taking action.

“It's really a minefield for everyone,” said Dr. Bennett Blum, a physician specializing in forensic and geriatric psychiatry who serves on the board of the National Committee for the Prevention of Elder Abuse.

“You can run into situations where the adviser has some serious questions,” Dr. Blum said, “either as to their own client's competency or whether or not the client has been, or maybe is being, inappropriately manipulated by someone.”

An InvestmentNews survey of 591 advisers found that 62% have seen or suspected financial abuse of an elderly client at least once. But more than half of those who suspected abuse — 56% — said they didn't report it.

IN survey
InvestmentNews surveyed 591 advisers about their experiences with elder financial abuse
How many times in your career have you seen or suspected financial abuse of an elderly client?
Yes, reporting should be mandatory
Yes, but reporting should be optional
No, reporting should not be the responsibility of an adviser

The trouble for advisers is while they often see hints of exploitation, the hints are often “very fuzzy,” and it's not within their expertise to figure out if the person sitting in front of them is being victimized, according to Dr. Blum, who provides expert evaluation in cases of undue influence and manipulation tactics. Indeed, 61% of advisers in the InvestmentNews survey said they didn't report suspected financial abuse of their elderly clients because they “did not have enough evidence.” The risk of litigation complicates their concern.

fear of lawsuits

“No one wants to be sued,” Dr. Blum said. “No one wants to have to spend a lot of time in litigation as a witness. No one wants anyone else going through all their files.”

Complicating the problem is the fact that as Americans are living longer, many of them at some point in their lives will suffer from some degree of dementia, with the most extreme cases turning into Alzheimer's.

About half of people over the age of 80 show some signs of impaired memory or cognitive problems, according to Dr. Blum. He said he sees many advisers doing their job without regard for this issue faced by their aging clients.

“I think of it as whistling in the graveyard,” Dr. Blum said.

"No one wants to be sued. No one wants to have to spend a lot of time in litigation as a witness." -- Dr. Bennett Blum, National Committee for the Prevention of Elder Abuse

The situation is complex. A decline in mental capacity can be hard to catch even for medical professionals because an older person's faculty for reason typically deteriorates before their ability to state something clearly does, according to Dr. Blum. They might unambiguously say where they want their money to go or what they want to do with it, yet their ability to understand current circumstances versus a year ago has diminished, he said.

“A person can still present themselves,” Dr. Blum said. “They have all their social skills, but underneath they're very impaired.”

About 16% of advisers surveyed by InvestmentNews said they had cut ties with clients who were showing signs of diminished mental capacity. The top three reasons for the decision were that the family situation was becoming too difficult to manage, there was concern about litigation risk, and the client refused to seek a medical consultation or follow financial planning recommendations based on the adviser's concerns.


The elderly victims of financial abuse tend to be female and white, according to last year's New York State Cost of Financial Exploitation Study. The study also estimated that for every case referred to authorities, between 10 and 44 cases go undetected. Victims reported just 2% of all cases, with family members, banks and other fiduciaries the most common source of referrals.

Cases often don't come to light because the victims feel embarrassed and the shame keeps them from opening up about their exploitation, according to Michael Liersch, head of behavioral finance and goals-based consulting at Bank of America Merrill Lynch Wealth Management.

Elderly exploitation: A problem advisers can't ignore

The consequences can be devastating, Ms. Shaw found.

“When they realize that they've been taken and their money is gone, there is fear,” she said. Many are worried about how they'll survive, she said, and there's also a “sense of inadequacy” because they failed to see they were being duped.

Many seniors worry they'll lose their independence and the freedom to make their own decisions if they admit to being conned or defrauded, Mr. Liersch said. He urges advisers not to be judgmental and emphasizes framing conversations in such a way that seniors aren't made to feel guilty for having put their faith in someone who took advantage of their trust.

Another factor that makes it difficult for some victims to come forward is that suspected perpetrators are often members of their family or someone close to them, such as a friend or caregiver. In the InvestmentNews survey, 65% of advisers identified a family member as a suspected perpetrator, while 30% pointed to a friend or acquaintance and 30% said it was a caregiver. (They were able to identify more than one type of perpetrator.)

Bank of America Merrill Lynch surveyed its advisers last year to identify the most common perpetrators of elder financial abuse and found that 71% cited children of the victim, with 32% flagging other family members and 18% identifying anonymous fraudsters. (They also were able to identify more than one type of perpetrator.)

The emotional complexity of the situation makes for difficult conversations, particularly when family is involved. Victims may be protective of the person who's manipulating them, especially when it's a daughter or son.

"You're telling her she somehow needs to rip out a part of her own heart. " -- Judith Shaw, North American Securities Administrators Association

“You're telling her she somehow needs to rip out a part of her own heart,” Ms. Shaw said.

Even as they're being exploited, victims may have a sense of guilt because they believe they've raised their daughter or son as a “good moral person,” she said. They might question their own role and ask themselves what they did wrong as a parent, Ms. Shaw said.

Elder financial exploitation is where domestic abuse was a few decades ago, according to Ron Long, director of regulatory affairs for Wells Fargo's brokerage business. “Folks would say, 'That's a family situation, they can work it out,'” he said.

Ms. Shaw agrees.

“We need to talk about it more,” she said. “It's hard to talk about.”

"There is some fire behind the smoke they're seeing out there. It's more prevalent than we thought."
Ron Long, director of regulatory affairs for Wells Fargo's brokerage business


While most advisers are concerned about preventing elder abuse, the InvestmentNews survey showed that 39% of advisers identified financial professionals as the suspected perpetrators of elderly financial exploitation.

Take, for example, a blind widow, and her husband while he was alive, who for 20 years trusted their broker, Hank Mark Werner, of Northport, N.Y., to handle their accounts in their best interests, according to Finra. After her husband's death, Mr. Werner visited the widow, who had extraordinary living expenses because she was severely debilitated and required in-home care.

The relationship didn't end well.

In August, Finra filed a complaint against Mr. Warner, charging him with securities fraud for churning the account of the 77-year-old widow to boost his compensation. Over a three-year period, he had charged her more than $243,000 in commissions, leaving her with $184,000 in net losses, according to the complaint Finra filed.

Mr. Werner's employer, Legend Securities Inc., fired him in March 2016.

How have you handled instances of suspected elder financial fraud involving a client?


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.