Financial abuse is a common occurrence among elderly people.  One in 10 Americans aged 60-plus has experienced elder abuse—and one of the most frequent forms of elder abuse is financial1. It is estimated that at least $36.5 billion is lost annually as a result of financial abuse among older Americans2.  Victims of elder abuse may suffer from mental impairments that perpetrators exploit to control their finances.

Callan Capital has developed a comprehensive plan and procedural process to proactively protect our clients as they age.  According to a recent study published by the National Institute on Aging, diminished mental capacity affects approximately 20% of people aged 85 years and older3.  One of the first areas affected by diminished capacity is the ability to understand and make financial decisions. It can result in poor financial choices and expose seniors to possible abuse and fraud.  Diminished capacity may be difficult to identify at times, especially in its milder forms. Diminished Capacity is defined as impaired mental capacity, any type of cognitive impairment that makes the client more susceptible than average to financial exploitation.

In the event that diminished financial capacity becomes a serious problem for you or a loved one, these steps can help you prepare4.

Organize your important financial documents.

Store your financial documents in a safe, easily accessible location. Give copies to trusted loved ones or let them know where to find them. Typically, the following documents will be most relevant to your finances:

  • Bank and brokerage statements and account information. Make a list of your accounts with account numbers. Keep a separate list of online bank and brokerage passwords and PINs and keep the lists in a safe place. In addition, make a list of the locations of your safe-deposit boxes, including where the keys to the safe-deposit boxes are located. Also, keep your recent bank and brokerage statements available, as well as information about how to get those statements online if you access them electronically.
  • Mortgage and credit information. Make a list of your debts and regular payments, with account numbers and names of the financial institutions that issued the loans or credit cards.
  • Insurance policies
  • Pension and other retirement benefit summaries
  • Social Security payment information
  • Contact information for financial and medical professionals, such as doctors, lawyers, accountants, and securities professionals.

Provide your financial professionals with trusted emergency contacts.

Consider adding a “trusted contact person” to your brokerage accounts.  We advise our clients early in the process through a variety of steps to keep them protected. As clients age, we suggest our clients establish a relationship with a trusted contact.  A “trusted contact person” is a person that you authorize your brokerage firm to contact in certain circumstances, in the event your broker has trouble reaching you or believes you are being scammed. When a financial institution sees signs of financial exploitation, trusted contacts are notified.

Additionally, Callan Capital works with clients to establish and/or evaluate a client’s advanced directives during their Financial Planning process. We encourage older clients (or those who have shown signs of diminished capacity) to bring or include their trusted contact in their investment meetings. Although this is not a requirement unless a client has been legally deemed incapacitated.

Consider creating a durable financial power of attorney.

A financial power of attorney gives someone the legal authority to make financial decisions for you if you cannot. That person is called your agent. The document is called “durable” because it remains in effect even if you become incapacitated. You retain the ability to change it or cancel it as long as you are still able to make decisions. A financial power of attorney differs from a health care power of attorney, which only covers health care decisions.

After signing a durable financial power of attorney, you can still manage your money and property as long as you have the ability to make decisions. Since you are essentially giving financial decision-making authority to your agent, it is critical that he or she be someone you can trust. You can learn more about power of attorney for your investment account assets by reading a recent alert by FINRA5.

Keep things up to date.

Be sure that if something changes (for example, you open a new account) you keep your information as current as possible. Also, your trusted contact may change over time. Keep your financial professionals informed of changes regarding who has authority to review your account or whom they should contact in case of an emergency.

Speak up if something goes wrong.

If you ever think someone is taking advantage of you, or that you’ve been the victim of a fraud, speak up.  There’s no shame in being a victim, and the sooner you let someone know about it, the better chance there is of putting an end to it.

Financial abuse can be difficult for a victim to identify, or openly seek help for. But there are red flags to watch out for:

Red Flags of Diminished Capacity & Possible Elder Financial Abuse

  • Memory Loss that disrupts daily life 
  • Challenges in planning or solving problems 
  • Difficulty completing familiar tasks at home, at work or at leisure 
  • Confusion with time or place
  • Trouble understanding visual images 
  • New problems with words in speaking or writing 
  • Misplacing things and losing the ability to retrace steps 
  • Decreased or poor judgement
  • Withdrawal from work or social activities 
  • Changes in mood and personality 
  • A client’s sudden reluctance to discuss financial matters
  • Atypical withdrawals or changes in financial situation
  • A client being concerned or confused by the amount of funds in their account
  • Wire transfers to unrelated third parties or foreign countries
  • Appearance of insufficient care despite having money
  • Sudden changes in estate documents (i.e., wills, trusts, power of attorney); and/or change in beneficiary
  • Admission of suspected exploitation
  • Confusion about money missing 
  • Client provides confusing or conflicting instructions regarding transactions 
  • Frequent repetition of orders or transactions 
  • Trouble understanding financial terms or concepts 
  • Denies having made a request 
  • Incorrectly recalls making a request 
  • Suspicious without cause
  • Loss of attention to self-care 
  • General loss of recall 
  • Inability to appreciate consequences of decisions

The best way to stop elder financial abuse is to prevent it before it starts. If you’re an elder, identify and try to protect yourself from financial exploitation.  Building trusting, personal relationships with your investment professionals is a best practice, however, this becomes even more important as we grow older.  When it comes to preventing financial fraud and abuse, establishing a relationship where your financial planner becomes your partner and sounding board can be vital.


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