YOUR FIELD GUIDE TO PREVENTING ELDER FINANCIAL FRAUD

Transcription

1 YOUR FIELD GUIDE TO PREVENTING ELDER FINANCIAL FRAUD

2 Most people don t spend much time worrying about whether they ll become the victim of financial fraud. Unfortunately, this overconfidence can leave people vulnerable. Financial fraud affects people of all ages, but it s no secret older Americans are more vulnerable and routinely targeted by scammers. In fact, the North American Securities Administrators Association has labeled elder financial abuse the crime of the 21st century. While many of us think this fraud won t happen to us, it makes sense to be prepared. Elder fraud is a complex problem that affects more than just your financial health. Some victims have reported experiencing stress, anxiety, difficulty sleeping, and depression as a result of being defrauded. At Transamerica, our concern is for you and your total well-being, because we want you to have a healthy and secure retirement. With that in mind, this guide was designed to help inform you about the prevalence of financial fraud and to provide education so you can protect yourself against this crime. Nearly 4 in 10 seniors are affected by financial fraud during any given five-year period The True Link Report on Elder Financial Abuse 2015

3 THE BASICS LET S START WITH A FEW FACTS ABOUT ELDER FINANCIAL FRAUD Each year in the United States, seniors lose about $36.5 billion to fraud, according to a report issued in early 2015 by True Link Financial, Inc. The report identified three basic types of elder financial fraud all of us should recognize. THESE INCLUDE: 1. Financial exploitation, which occurs when businesses, individuals, or charities use pressure tactics or misleading language that cause seniors to make financial mistakes. 2. Criminal fraud, which happens when thieves commit identity theft or con seniors into sending money or sharing their personal information. 3. Caregiver abuse, which can also be characterized as trust abuse. This occurs when family, friends, or paid helpers take advantage of a trusting relationship to swindle money from a senior. You should also know nearly 4 in 10 seniors are affected by financial fraud during any given five-year period. 1 When successfully targeted, seniors have less time and fewer resources available than those who are younger to recover their losses. $36.5 Nearly $36.5 billion is lost each year in the U.S. to elder financial fraud. 1 billion THE BASICS TRANSAMERICA 3

4 Nearly 1 million seniors skip meals as a result of financial fraud. Because wealth and health are inextricably linked, it s no surprise the impact of financial fraud goes beyond the financial ramifications. It s been linked to depression, skipped medical care, and reduced nutritional intake for budgetary reasons. In fact, the True Link report said it s estimated nearly 1 million seniors skip meals as a result of financial fraud. 4 The True Link Report on Elder Financial Abuse 2015

5 You probably wouldn t think seniors who are financially sophisticatd would be vulnerable to fraud, but they are. WHO FALLS FOR FRAUD? Not surprisingly, many older people who are targeted by con artists are living with health conditions like stroke, Alzheimer s disease, and other causes of dementia. The True Link report also noted that a person who receives at least one phone call from telemarketers per day is likely to lose three times as much money to fraud as someone who receives only a few or no calls. A few other character profiles mentioned in the report might surprise you. You probably wouldn t think seniors who are financially sophisticated would be vulnerable to fraud, but they are. This might be because they are confident about their decisions and comfortable moving large sums of money. Those who are college educated can also fall victim, especially when they are also financially sophisticated. The theory is these characteristics might give seniors a sense of overconfidence makes them more susceptible to fraud. In fact, some studies have shown overconfidence can increase even as cognitive abilities are in decline. The report said seniors who live in urban areas are defrauded more often than those living in rural places. And those who are extremely friendly can be at risk. Those with the friendly grandma syndrome are often too polite to hang up the phone on telemarketers, and these seniors lose four times the amount of money to fraud as a peer with a more typical level of friendliness. Perhaps one reason for this is the extremely friendly tend to expose themselves to more people in general, meaning they might encounter more individuals with bad intentions. DEBUNKING A FEW MYTHS While it s interesting to get a general understanding about who falls for fraud, it s also intriguing to learn some common stereotypes are simply false. In the case of elder fraud, it s often thought women, older seniors, those living far away from relatives, or who have lost a spouse or partner are more vulnerable to fraud. True Link found no evidence to support any of this. In fact, the report said widowed people experienced 8% less financial fraud than those who are married. SENIORS ARE NOT NECESSARILY MORE SUSCEPTIBLE TO FRAUD IF THEY ARE THE BASICS TRANSAMERICA WOMEN OLDER LIVING FAR FROM RELATIVES WIDOWED 5

6 DISCOVER THE REASONS SO MANY HAVE BECOME VICTIMS OF FRAUD WHY PEOPLE FALL FOR FRAUD So why do seniors fall for fraud? Again, none of us are immune to being scammed. And thieves use several clever persuasion tactics to entice their victims. One tactic is to prey on a person s emotions. Marguerite DeLiema, PhD at the Stanford Center on Longevity said when a person is in a state of high emotional arousal, their rational decision-making is altered. Imagine a scam artist has called an older adult to inform them they ve won a lottery or sweepstakes. The con man, or woman, might say: I m so excited to let you know you ve won $500,000, but to claim the money, you ll need to send us $500 immediately. You won t win unless you act now. If you don t, we ll move on to the next person. DeLiema said this causes some people to act because $500 is worth the risk in their mind at that moment. She said emotional arousal has been empirically shown to affect older adults decision making more strongly than those who are younger. 6

7 A POSITION OF TRUST Another reason seniors are defrauded is because they often rely on family members to care for them. Unfortunately, numerous studies have shown the most common type of fraud is perpetrated by a family member or paid caregiver. Close friends or others in a position of trust have also been known to perpetrate elder financial fraud. The True Link report provided a few examples. One is the helpful son or nephew who asks to borrow $100 every morning when he visits his cognitively impaired mother or aunt, knowing she won t remember his previous requests. Another is the paid caregiver who methodically steals family heirlooms or the close friend who needs a small loan to get back on her feet. The reason caregiver fraud is so difficult to combat is because the fraud happens as a result of a trusting relationship. DeLiema said this fraud is often underreported because the victims will often refuse to admit they ve been defrauded. Why? Because it breaks down the idea that the perpetrator is the bad guy. In cases of fraud involving strangers, DeLiema said it s easy to point to the con artist. However, when it s your adult children, or someone else you love and trust, it s much more difficult to think of them as a criminal. Additionally, DeLiema said the victims might be worried about being placed in a more restrictive care setting like a nursing home if they speak up. SITUATIONAL ABUSE Other instances when seniors fall for fraud are in times of stress or grief, situations in which people are most vulnerable. This is known as situational abuse. Examples include being discharged from the hospital, when a person might be on fairly heavy doses of medication, or immediately after losing a spouse, when depression is starting to set in. Let s clarify one thing: Earlier, we said widows are not necessarily more likely to become a victim of financial fraud. But they are at risk when they are grieving because it is an extremely emotional and stressful time. MOVING Another instance where people are vulnerable is during a housing transition, when stress levels are high. This can include a move from a home you ve lived in for years to a 50-and-over community, or relocating from a 50-plus community to a nursing facility. Each of these are life events where people can suddenly become vulnerable to fraud. DEMENTIA And then, of course, there s cognitive decline, such as Alzheimer s disease or other dementias. Transamerica has collaborated with researchers at the Massachusetts Institute of Technology AgeLab to create several educational materials to help people prepare for the financial ramifications of Alzheimer s disease and other common causes of dementia. Ask your financial professional for these materials. REASONS FOR ELDER FRAUD TRANSAMERICA 7

8 8

9 HOW TO PROTECT YOURSELF There are a number of steps you can take to protect yourself. First, be alert to financial fraud. Awareness is perhaps our most effective tool to fight this crime. Second, if you suspect you ve been defrauded, talk with someone you trust. Whether it s a spouse or adult child, an attorney or tax advisor, or your financial professional, simply talking to someone about the situation can be helpful in determining whether fraud has occurred. Several actions you can take to protect yourself against fraud are listed below. Here are several actions you can take to protect yourself against fraud. BE AWARE Understand you re vulnerable during times of life-change or when you experience a loss. Know it s OK to hang up on telemarketers, and if you have caller ID, you re not obligated to answer calls from unfamiliar numbers. Familiarize yourself with common scams. We ve created a piece describing several of these schemes. Be skeptical when you re told you ll get money if you send money first or when something sounds too good to be true; be wary of deals that are only valid if you act today. Consider registering home and mobile phone numbers with the National Do Not Call Registry, donotcall.gov. Don t think you ll never be a fraud victim. Even if you consider yourself financially sophisticated, you should watch for scams. Don t put important personal information, such as your address or that you re away on vacation, on social media. Work with a reputable financial professional from a Financial Industry Regulatory Authority (FINRA)-member firm (see FINRA.org/brokercheck). HOW TO PROTECT YOURSELF TRANSAMERICA 9

10 CREDIT SAFETY Consider a low-limit credit card (perhaps $1,000 or $1,500) for day-to-day purchases. Use debit cards sparingly, and never give out the PIN. Consider freezing your credit making it more difficult for scammers to open new credit in your name by contacting the three primary credit reporting companies (Equifax, Experian, and TransUnion). A small fee may apply. An alternative to a freeze is a fraud alert, which allows access to credit reports as long as steps are taken to verify your identity. This service is free. CAUTIOUS BANKING Guard bank account information, especially debit cards. Use care with joint bank accounts because they can be an invitation to fraud. In most states, money held in a joint bank account automatically goes to those named on the account when a joint owner dies. AARP recently listed viable alternatives to protect seniors from the risks associated with joint bank accounts. Convenience accounts allow an authorized individual to make transactions on behalf of the owner, but that person does not ultimately inherit the money when a joint owner passes. View-only accounts allow people the owner trusts to monitor the account without allowing access to the funds. Payable-on-death accounts are used when an inheritance is the primary concern POWERS OF ATTORNEY (POA) Tip: Don t put important personal information, such as your address or that you re away on vacation, on social media. 10

11 Thoughtfully select your power of attorney because fraud can occur when these powers are granted to the wrong individuals. While it may seem like common sense, don t appoint anyone who has a history of financial, or even behavioral, problems. It s best to choose people who have experience with the types of accounts they will be asked to manage. Consider joint agents, where two people must agree on the actions being taken. While this can make questionable transactions more difficult, Stanford s Marguerite DeLiema said it decreases the chances of fraud because each person keeps the other accountable. HOW TO PROTECT YOURSELF TRANSAMERICA 11

12 Everyone s future deserves protection. To learn more about Transamerica s Field Guide to Preventing Elder Fraud series and to get support materials: Visit: Transamerica.com/fraud Contact: Your Financial Professional NOT A DEPOSIT. NOT FDIC INSURED. NOT GUARANTEED BY THE BANK. MAY LOSE VALUE. NOT INSURED BY ANY FEDERAL GOVERNEMENT AGENCY. Transamerica Resources, Inc. is an Aegon company affiliated with insurance companies and broker-dealers. However, Transamerica Resources, Inc. does not offer insurance products or securities. This material is provided for informational purposes only and should not be construed as insurance, securities, ERISA, tax, investment or legal advice. Although care has been taken in preparing this material and presenting it accurately, Transamerica Resources, Inc. disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. Interested parties must consult with and rely solely upon their own independent advisors regarding their particular situation and the concepts presented here _TLFG Transamerica All Rights Reserved.