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My parents were in their mid-40s when I was born. By the time I was a senior in high school, my mom and dad were already considered senior citizens. But both my parents were intelligent, thoughtful, practical people blessed with razor-sharp wits – especially my dad, who had a particularly keen sense of humor.
Watching my parents age while I was still so young was a surreal experience. As time went by, and they were getting into their 70s, I could see them taking longer to ponder simple decisions. Almost anything new that seemed overly complicated became a bit annoying to them
Most of us will watch our parents slow down with age. Then, one day, the tables suddenly turn, and it becomes our turn to watch out for them. This goes beyond the obvious physical things like making sure their sidewalks are shoveled during the winter. Whether they’ve shown any signs of serious cognitive decline – or just the occasional hiccups in memory – protecting aging loved ones from physical harm isn't our only job. It’s also up to us to watch out for predators who could threaten their financial wellbeing and security.
Seniors: The Most Common Scam Victims
The National Council on Aging notes that at least 5 million cases of elder financial abuse are reported in the U.S. every year. It's likely much worse. Researchers estimate that law enforcement only learns about one out of every 25 cases.
The True Link Report on Elder Financial Abuse pegs the amount of losses seniors suffer from financial abuse at $36.5 billion, but the true amount is likely much higher than that, CNBC reported this year. Seniors control about 75% of the wealth in the U.S., and the reality is that older people can’t afford to lose money because they don’t have time to make up losses from scams.
Financial abuse may be hiding in plain sight. Victims tend to be more affluent, but in truth, any middle-income senior can be trapped. What does financial abuse look like? These are just a few smoking guns:
- someone changing their will or other legal documents
- money or property being used without their knowledge or permission
- forged signatures
- someone borrowing money without repaying it
- fraudulently obtaining a power of attorney or guardianship
- fraudulent insurance or investment schemes
- "sweepstakes" offers and lottery scams requiring that they pay money to collect their "winnings"
- identity theft
- fake health or pharmaceutical products
- unnecessary or predatory lending practices
But scams can also be much more subtle. A broker, insurance agent or other financial advisor may be pitching complicated investments that are supposed to provide security and be low risk, but are really intended to make the advisor money in huge upfront commissions and ongoing fees. This video from my television series "MoneyTrack" on PBS will give you an idea of the dangers facing the elderly and why they may be especially vulnerable to them.
Your parents watched over you when you were growing up, and it can be a bit of an awakening when you realize that it's your turn to watch out for them. Just being aware is the most critical first step; adult children may not be close enough day to day to realize what's happening to their parents' finances. All the same, there are things you can do to watch out for them even from afar. One of the most useful steps is to simply pay attention to who's watching their finances and who's aware of how much money they have.
For example, the friendly neighborhood banker may convince them to cash in their FDIC-insured certificates of deposit and instead buy variable annuities that have restrictions and high costs. They might convince your parents that understanding what’s in the fine print isn’t necessary when you have someone from the bank right there to highlight all the benefits. Your mom or dad may believe the banker is just looking out for their best interest when he's actually a a salesman looking out for his commissions.
You probably can’t be there to monitor every transaction or investment your parents make, and you don’t have to be. You also don’t need to be a financial investigator or an expert. Find your parents a real financial advisor who practices as a fiduciary and will sign a fiduciary oath.
Requiring an advisor who will take a fiduciary role will go a long way to help weed out the salespeople. Start by understanding the difference between the suitability standard and the fiduciary standard. The first means that an investment is simply "suitable" for your parents: Just because an investment is suitable doesn't mean that it's beneficial. Advisors who follow the much higher fiduciary standard, however, are truly looking out for your parents – not just trying to pad their own pockets by selling investment products that pay them hefty commissions.
Vet possible advisors by looking at their background records and overall approach to retirement planning and investing, which should be fully transparent, with all advisor fees fully disclosed in writing. Then, keep an eye on everything they're doing. Financial advisors in the U.S. are supposed to be licensed or registered. You can check them out via the SEC's Investment Advisor Public Disclosure database and FINRA's BrokerCheck site. Enter their name and/or their firm's name. Advisors should also be willing to give you their Central Registration Depository number to make the searches even easier.
Talking to Your Parents About Their Money
Money is a sensitive topic to talk about with parents. Chances are, though, they will want to discuss their estate plans, and that’s an excellent opening to ask questions about how their bank accounts are organized, and how they feel about their investments.
Another way to introduce the subject is asking if they’re happy with their financial advisor. Whenver you're talking about their overall health and well-being can also be a good time to gently bring up their finances. It’s especially important to get your mom to open up about her financial concerns because, like many women, she may have relied on your dad to make the big investing decisions. It’s a fact that women now control 53% of all the wealth in the US, and according toTIAA-CREF, Baby Boomer women lean on outside advisors or family and friends for financial guidance.
Realize that your parents may have already been victimized without telling you about it because they may feel embarrassed. Many older people don’t want to report such incidents, either to their own adult children or even to the authorities.
The irony is even greater for parents whose children work in the financial industry. For my series "MoneyTrack," I interviewed an older couple who lost their life savings when their accountant sold them some unregistered investments. Afterward, I asked them if they had ever considered confiding in their adult children about this scam. They felt their son was busy with his own kids and they didn't want to burden him with their money problems. When I asked what their son does for a living, their answer was that he is a certified financial planner.
So take the initiative and gently check in on your parents because they may feel uncomfortable about taking the initiative.
Good Steps to Take
I started the conversation about money when I knew my parents wanted to talk to me about their health. Every family is different, but here are some steps that will help simplify your parents' financial lives when they get older.
- Find all accounts including bank, brokerage and insurance information as well as safe deposit boxes. Ask for ‘view only’ privileges so you can monitor activity.
- Determine who should pay the monthly bills so they are paid on time. Automate as much of the process as possible and ask the bank if they offer email ‘alerts’ that let you know when balances fall below a certain minimum.
- Reach out to an attorney and respectfully discuss setting up a power of attorney or a living trust.
- Consider bringing in a vetted, fiduciary financial planner to analyze all of their investments, cash flow needs and a plan to maximize their savings.
Ten years or so before my parents passed away, I was nervous to bring up the subject of their finances. When I did find the right time, it came from a place of love and respect, and I think they knew that. I also believe my dad was very relieved because I don’t think he would have ever come to me for help for himself, but he had deep concerns for my mom and that was my opening. Looking back, I now realize the details of their financial life were a burden for them and I’m thankful I had the guts to talk openly with them.
Pam Krueger is the founder of "WealthRamp," co-host of "MoneyTrack" on PBS and national spokesperson for The Institute for the Fiduciary Standard.