NASAA: Ethical Financial Advisors Can Help Clients Avoid or Spot Fraud
According to a 2015 report from the retirement planning site True Link, American senior citizens lose an estimated $35.6 billion each year from investment scams and other fraudulent financial schemes. Despite the role that shady financial advisors play in many cases of elder fraud, ethical advisors may be the people best equipped to determine when financial fraud has been perpetrated on one of their elderly clients by another individual.
The idea that brokers can act as a shield against elder fraud isn’t just an fuzzy concept: according the North American Securities Administrators Association (NASAA), brokers and financial advisors report more than 2,300 cases of elder fraud each year. Considering the fact that many elderly individuals may not possess a high degree of financial literacy (in addition to issues with cognitive decline, such as dementia-related confusion or memory loss) brokers and advisors are in a perfect position to identify financial inconsistencies in accounts, such as large, unexpected withdrawals or a series of small, suspicious ones.How some firms are helping prevent elder investment fraud
While brokerage firms have a long way to go when it comes to policing their industry, many firms have made steps in the right direction. According to the NASSA study, 95% of brokerage and advisory firms do provide their employees some kind of training regarding elder fraud, and 90% have a team or a specific process for dealing with senior issues. However, there’s still a lot of work to do – as only one-third of the firms surveyed had a truly comprehensive approach to elder fraud, including policies such as providing family contact forms for senior clients. A majority (54%) of the firms also lacked a specific policy defining senior customers.How elderly investors and their family members can spur brokers to identify the warning signs of fraud
If you believe that you or an elderly family member is at risk for financial fraud, it’s important to have a productive conversation with your financial advisors about the issue, especially after a recent change to a new advisor, or upon consideration of a new one. You should ask questions that include:
What are the firm’s general policies on elder fraud prevention?If and how they collect contact information of family members or guardians to report suspected elder fraud
- If and how they collect contact information of family members or guardians to report suspected elder fraud
- If and how they collect contact information of family members or guardians to report suspected elder fraudHow and to whom do they report suspected elder investment fraud?
- How and to whom do they report suspected elder investment fraud?
- How do they deal with brokers or advisors in their own organization who are suspected of fraud?
- How do they deal with potential cases of intra-family elder fraud (a family member is suspected of perpetrating an investment fraud on an elderly individual)?
Much of a broker’s ability to prevent elder fraud simply relies on being vigilant and aware of each of their elderly client’s accounts. For example, if a broker sees a large order for a type of investment they know is unsuitable for their senior client’s investment goals, they could put a hold on the order until meeting with the client. This meeting affords the opportunity to ensure that the client is aware of the transaction, that he or she is of sound mind, and that he or she understands how the investment works (and what kinds of risks and returns they can realistically expect).Always make sure to thoroughly vet brokers or advisors to protect yourself and your family from fraud
If you or an elderly family member is concerned about becoming a victim of elder fraud, it’s important to make sure that the broker or advisor himself isn’t posing a risk – and that’s why it’s essential to research them first.
While a Google search is a good place to start while researching a broker or financial advisor, you’ll also want to check out their professional records, including their BrokerCheck Report. This helpful service provided by the Financial Industry Regulatory Authority (FINRA) reveals a broker’s work and education history and any disputes filed against them by customers alleging unethical activity, as well as the outcomes of those disputes.
If a broker has complaints levied against them, it’s a good idea to stay clear. With so many credible professionals out there, there’s no reason to invest (or have an elderly family member invest) with one with a less than stellar reputation. And if you think that you or an elderly family member has already become a victim of investment fraud or other activity that violates securities industry regulations, contact an experienced attorney immediately.
The attorneys at Silver Law Group are leaders in the field of securities arbitration and elder financial fraud. We represent individual and institutional investors across the United States who have lost money at the hands of a trusted financial advisor. Our services are provided on a contingency-fee basis, which means that we are only compensated if there is a recovery of losses. Contact us for a complimentary consultation about your situation.