While the financial advice industry for the last twenty years has continuously rung the alarm bell that financial advisors are getting older and are not being replaced nearly fast enough, another concern for the financial advice business, with more than 300,000 registered salespeople, is perhaps more acute: what if some of those older advisors fall prey to dementia or other conditions that diminish intellectual functioning?
“Every single one of the firms has advisors who are over the age of 50 or 60 70, said Steve Youhn, senior vice president, chief compliance officer, Cambridge Investment Research, during a panel Tuesday morning in San Diego at the Financial Services Institute’s annual meeting, OneVoice.
“We had an interesting scenario with a 57-year-old advisor a couple months ago,” said Youhn, who was speaking on a panel titled ‘Scams Targeting Vulnerable Clients.’ “It was continuing education time. Over the course of two hours, he called into the same person, asking how to do” the specific continuing education course while forgetting he called previous times.
“It set off alarms,” he said. Meanwhile, Cambridge staff eventually learned from the advisor’s spouse, a doctor, had diagnosed him months earlier with dementia.
“It was just a mess at that point,” Youhn said. “The advisor did not believe that he was suffering from dementia at all.”
Cambridge also discovered that the advisor had made multiple orders for the same series of clients’ trades, a worrying sign, Youhn said. “And after that, the advisor reached out to clients and indicated that the new advisor was stealing the book.”
Youhn added that firms should have some kind of process in place to face such problems, and will need also to face potential human resources and defamation issues. It's impossible to know how many financial advisors could be suffering from dementia, but the risks are great. It takes years for dementia to manifest and be diagnosed, adding to the risk for advisors, firms and clients.
Meanwhile, turning to financial advisors’ clients, Americans each year are losing tens of billions of dollars to scam artists, many overseas, according to the panel, which also included Tara Ambrose, Senior Financial Fraud Ombudsperson, Enforcement Division, Minnesota Department of Commerce, and Brady Finta, CEO, National elder Fraud Coordination Center, and a former FBI agent.
Current investment scam trends the speakers pointed to included: tech support scams; recovery scams, the risks of victims moving from one financial institution to another; romance scams; limited time land deals; scams that evolve or morph over time; precious metals and gold bar scams; and AI celebrity scams.
And once a scam artist gets their hooks into a victim, including financial advisors, they keep coming back for more, repeatedly stealing assets until nothing is left.
“They’re not just trying to get $200, or $2,000, or even $200,000,” Finta said. “They’re trying to get absolutely everything the victim has. That means cashing out an IRA or 401(k). That means a second mortgage.”
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