After SAFE Act Passage, The Battle Against Elder Financial Abuse Remains Far From Over
Elder financial abuse impacts millions of Americans each year, to an estimated tune of $2.9 billion annually. The financial exploitation of senior Americans is only going to continue to grow as scams targeting that segment of the population become more sophisticated. In an attempt to take a step towards countering some of the negative impact of elder financial abuse, the government recently passed the Senior Safe Act in May 2018, as part of a bipartisan banking reform set of laws. Simply put, the aim of the new law is to encourage financial institutions to take a more proactive role in the fight against elder financial abuse.
The Senior Safe Act, modeled after Maine’s Senior$afe program, calls on financial institutions to train their employees on how to detect suspicious activity that might indicate elder abuse. If the financial institution trains its employees, the law also provides both a process on how to report concerns of suspicious activity and liability protections for those reporting it. The liability protections could empower some financial advisors to be more proactive, but basic business practice hurdles still remain for them.
Many advisors with whom I have spoken on this issue have shown hesitancy to report any client who appears to be suffering from declining mental competencies or from elder abuse. The reality is that these two events often coincide. Advisors are not trained and likely won’t even feel fully confident to make a judgment about a client’s mental capacity. While some court cases have put this onus on the advisor when selling certain products or strategies, financial advisors don’t have the skill or authority to make a medical diagnosis of their clients. Without being able to identify when or if someone’s mental competencies are starting to decline, any other reporting or intervention will likely occur well after the damage of elder abuse is already done.
Michaela Scott, Certified Financial Planner and Retirement Income Certified Professional, talked with me about how she handles these difficult conversations with clients. She stated that “in our quarterly reviews with our clients we ask if anything, and importantly, anyone is creating stress regarding their financial security…clients may not answer in that meeting but it creates an awareness and gives the client permission to tell us about any strange or uncomfortable encounters when we ask them the next quarter or the quarter after that. After time, clients pick up the phone and call us in between if something seems suspicious to them regarding themselves or their loved ones.”
Another major hurdle is that family members and friends are typically the main perpetrators of elder abuse. This makes it difficult to identify elder abuse from the outside looking in. The victim often does not want to press charges or report a family member or friend for fear of jeopardizing an emotional relationship or for fear that any action will only make the situation worse.
Advisors have also been hesitant to report suspected elder abuse by family members and friends of their clients because they do not know the whole situation. If the client believes the advisor overstepped, the advisor might be fired. Even with liability protections currently in place for advisors who report suspected elder abuse, if they act preemptively, or if the client is bothered by the advisor’s actions, the advisor will still likely face financial ramifications. Notwithstanding, advisors should still do the right thing and report suspected elder abuse, even if it means losing a client. Unfortunately, the risk of losing the client will always hinder some advisors from acting or reporting.
It will take a village to protect seniors and stop elder abuse. The financial advisor alone will not be able to solve this problem, even with additional resources, training, and liability protection laws. Seniors and victims also cannot be expected to fully protect themselves without support. However, financial advisors do play a very important role. Hunter Hart, Certified Financial Planner©, at Equity Planning, Inc. say, “It’s important for advisors to stress how devastating the consequences of elder abuse can be to a family’s wealth and encourage their clients to put protections into place before it’s too late.”
Protecting against elder abuse starts years in advance of the first signs of declining health in the aging process. It begins with setting a plan for managing financial assets and having the proper documents in place, like medical power of attorney, general durable power of attorney, a living will, and other estate planning documents. By being proactive when individuals are young, healthy, and mentally competent, they can make it harder for someone to take advantage of them later in life. This means working with their attorney and financial advisor to make sure a plan is in place. Financial advisors need to make sure to discuss what their clients want them to do in the event that they believe elder abuse is going on, or if the individual is showing signs of diminished mental capacity.
Elder abuse is a plague on our country and it is ruining retirement security, destroying families, and harming great people. While this year’s new laws are a helpful step forward in the battle against elder abuse, there remains an urgent need for more coordinated efforts. Real hurdles still exist and no one person can solve these issues in any given case. A final piece of advice to the consumer: when you are young and embarking upon your own financial plan for the future, speak with your advisors, family, and friends who have experience in this regard so that you can be as proactive as possible in combating this incredibly harmful and devastating form of abuse.