With Mental Health Awareness Month once again in full swing, it's a good time to revisit the risks elderly investors face from a particular flavor of fraud – and the frontline role financial advisors can play to protect people's wealth.
Amid the already overwhelming list of threats senior clients face, bad actors are increasingly using romance scams – also known as relationship scams, confidence scams, or "sweetheart" scams – to trick unsupecting victims into giving away significant chunks of their wealth.
The National Council of Aging has flagged the risks for older adults venturing into online dating platforms. After setting up fake online profiles with attractive personas, scammers are able to engage lonely 60-somethings with significant retirement savings, cultivating an intimate relationship with tactics such as "love bombing" and material gifts early on, only to later exploit their victims with stories of hardship and requests for large cash transfers or other gifts.
While it's impossible to measure the exact scope of the problem, the most statistics from the Federal Bureau of Investigation hint at an upward trend. The agency's Internet Crime Complaint Center said last month that seniors reported a total of $390 million in losses from romance scams in 2024, surging higher from the $357 million in losses from romance scams it counted in 2023.
Thomas West, senior partner at Signature Estate & Investment Advisors in Virginia, is well aware of the factors that make many elderly clients prone to relationship scams – even if they aren't necessarily suffering from impaired judgment.
"Where am I going to get a little bit of excitement ... [something that] just adds a little sizzle in my life? That's a real thing for a lot of seniors that are isolated," West told InvestmentNews in a recent interview.
West recalled how one client in her mid-70s, Tina – her name has been changed to protect her privacy – who had spent an extended period caring for her husband suffering from dementia. Following his death, the family collectively agreed she should be able to spend her money freely after being a primary caregiver for so long.
After that, she called the firm several times to make various withdrawals, claiming she was making travel plans or wanted to make improvements to the house. But in time, her adult son discovered she'd actually gotten caught up in a sweetheart scam, with an overseas group of bad actors targeting Tina after profiling her as a lonely widow online.
"It was a typical romantic scam, and the [funds] she was requesting were actually getting wired abroad," West says. "After that, her children wanted to take control [of her finances] away from her almost immediately. ... The reality was Tina did not have a cognitive impairment. She was depressed, she was lonely, but she knew what was going on."
Because they don't want their adult children assuming they can't function independently, West says many elderly clients can be secretive, refusing to admit even when they know they're being scammed. Navigating around that deep-seated shame can make it challenging for advisors to protect clients they suspect are being exploited.
To help protect potentially compromised clients without confronting them, West says it can be useful to bring up a third party – asking what an adult son or daughter thinks about a transaction, for example. Bringing up other factors to consider or suggesting that they get a second opinion can also give an elderly client enough pause to reconsider a large withdrawal they might regret.
"I think having those kinds of oblique due diligence conversations can help keep people from [feeling like they're] getting challenged," West says.
While plenty of regulatory requirements and guidance are already in place to help protect elderly investors – around trusted contact persons or freezing transactions, for example – West argues much of it is designed to minimize liability for financial institutions rather than prevent actual harm to clients.
To truly make an impact, he suggests that advisors need resources around how to actually handle sensitive conversations around fraud. Beyond fixating on prevention – which is growing increasingly difficult with the rise of AI and other technologies – he says it's also important to acknowledge scams as a "state of nature" by encouraging victims and their advisors to share their stories.
"People get scammed all the time. What do we do after it happens?" West says. "If you go at it that way, I think you normalize it and make yourself a trusted resource for when it actually happens [to someone else]."
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