Preventing Elder Financial Fraud

Elder fraud is common and the potential impact can be devastating.  I have spoken with several family coordinators of care whose parents have been victims.  One man in his eighties was convinced to buy a reverse mortgage when he didn’t need one.  Another woman in her seventies started using sweepstakes sent to her by mail.

I often hear from family members “I’m worried because I’m not there” or “my father is independent and lives alone, but he can get confused sometimes when it comes to money.”

When an event occurs families feel cheated, surprised and overwhelmed.

I want to enable you to quickly identify steps to avoid fraud.  I want you to feel comfortable even if you live states away.

I wrote extensively about the overall topic in a 4,000 word piece “Watching Over Your Parents’ Finances Without Robbing Them Of Their Dignity”.

In this post I want to be more specific.  I want to encourage you to have a conversation with your loved one about preventing financial fraud.

After a 10 minute conversation with your loved one you will know your family has taken clear steps to avoid elder financial fraud.


Opening The Conversation

My favorite method to start a discussion about money is to ask advice.

“Dad I’ve recently been thinking of taking a trip to Europe with some friends but I’m struggling to save for it.  How did you and Mom save for trips in the past?  Any good tips or tricks?”

Or you can be more direct about the topic on hand.

“Mom, my friend at work was just a victim of identity theft.  Luckily she found out within a few days from her credit card company but it’s a lot of work.  It looks like she will need to spend multiple hours getting back thousands of dollars.  It’s scary!  Any advice for me to avoid something like this?”

Starting a dialogue about money is the hardest part.  Go with the approach that you feel works best for your relationship.  Then pivot into the topic you want to discuss with them.

If you meet resistance ask them what a better time may be.  Agree upon a specific day if possible.


Holding The Conversation

The goal of the conversation is to review some of the most common tactics of fraud and to have an open and honest conversation.

You will be surprised.  Just having the conversation will unveil new things you have never discussed before.  You will talk about steps each of you will take.  You will learn about what your loved one is worried about.

Below are the critical discussion points:

1. Is The Financial Advisor A Fiduciary?

This will be the only time that I use financial lingo.  I only use it because the word fiduciary is critical to understand.  It means that the advisor is legally bound to put your interests above their own.

The significant majority of financial adviser are not fiduciaries.  They are in fact bound by law to put the interests of their company above yours.  This means they will try and sell you products like an annuities and life insurance that give them a big commission.

A quick way to cut through all of the crap with anyone who approaches your loved one about investing their money is to ask one simple question: “Are you a fiduciary?”  Review this term with your loved one and you’ll save a lot of potential headache.

2. What Would A Second Opinion Say?

Just like you would at the doctor’s office always get a second opinion on any investment advice.  Even if you ask the adviser why they feel a certain strategy or product is good for your loved one it will be difficult to get a straight answer.

Take 10 minutes now and use your zip code to find a fiduciary by searching here or here.  All will have an introductory 10-15 minute free conversation.  Ask them what they think about the recent advice that you received.

Never make a large financial decision without getting a second opinion.  You wouldn’t get a major surgery without talking to a few people.  Use the same care with any investment call.

3. Can You Check Their Background?

All investment advisers are required by law to file their certifications.  The legal system also collects any major complaints and / or issues filed against a specific adviser.  Before pulling the trigger with any investment adviser check their background.

It’s simple and takes 10 minutes.  Use either of the two options below.  You just need the adviser’s last name and company name.

4. Can A Family Member or Trusted Friend Accompany You?

A significant amount of elder fraud takes place because the fraudsters take advantage of the mental effects of aging.  Cut this off at the pass.  Speak with your loved one about participating in any major financial discussions.

This can be difficult at times because it can feel like a direct challenge to their independence.  Here are a couple phrases to use to open up the conversation:

  • “Mom, would you feel comfortable if I joined you for your discussion with your financial adviser next week? It would be helpful to me to feel like I could support you.  I also think I could learn a great deal about my own retirement planning for my family.”
  • “Dad, I am concerned about your financial planning for the future. With your decreased memory at times I want to make sure that no one tampers with the great plan you laid out earlier this year.  Can you give me a call if anyone approaches you to change that plan?  All of the decisions are yours in the end.  I just want to make sure you’re ok.”

Great work.  Review the above items and you’ll be significantly further along than 99% of American families in preventing elder fraud.  If your loved one’s situation has progressed to where they need more direct oversight from you or a family member check out my last post.  It will provide you with all of the tips and tools that you need.

Have you or someone you know ever been a victim of eldercare fraud?  If so, shoot me an email with the issue you ran into and two steps you took to solve it.

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Published: July 9, 2015
By: JP Adams

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