Financial abuse and fraud that targets elderly clients can do more than devastate their savings and ruin their credit. The AICPA’s recent Personal Financial Planning (PFP) Trends Survey found that falling victim to fraud is much more likely to have an emotional impact on the elderly than a financial one.
Of the many types of fraud or elder abuse CPA financial planners have seen perpetrated on their older clients over the past five years, phone and internet scams top the list. The next most common issue is the inability to say “no” to relatives and identity theft.
Dealing with financial fraud and elder abuse is one of the unique challenges CPA financial planners face working with aging clients. Jean-Luc Bourdon, CPA/PFS and Founder of Lucent Wealth Planning, LLC, spoke to AICPA Insights about this difficult and unfortunately common elder planning topic.
Why do you think many CPA financial planners find the impact of fraud and financial abuse upon the elderly to be more emotional than financial?
Jean-Luc Bourdon: In many situations, the person who is taking advantage of the elderly is someone they have trusted. And at any age, shattered trust can be deeply unsettling, even traumatic. Among the elderly, it tends to make them feel vulnerable and doubt their ability to recognize risks. The fear of no longer being deemed capable of living independently can be crushing as well.
What’s more, self-blame often comes into play when people think they should have seen the fraud coming and therefore it is somehow their own fault. Shame can be powerful enough to prevent seniors from reporting fraud. This is common when the perpetrator is a person close to the victim. While a loss caused by fraud is generally an isolated event, the distressing feelings it causes can last a lifetime.
How do you prepare your elderly clients for potential scams that they may encounter?
JB: I have found that a good way to warn clients about the scams that are out there is by telling them real-life examples. The moral of the story is always that scams can be very sophisticated and that verifying the information you’re being provided by contacting a third-party is always a good idea.
I encourage my clients to slow down new requests or offers by saying, “I need to run this by my CPA.” I constantly reassure clients that I am grateful when they forward me emails or bring mail they received. The time it takes to review the information and protect my clients from a potential scam is well worth what they have earned over a lifetime.
Though still prevalent, CPAs are seeing slightly fewer occurrences of certain kinds of fraud, such as phone or internet scams, ID theft and mistaking charity requests for a bill. Why do you think these are trending down?
JB: Hopefully, greater awareness of this issue is making everyone more vigilant about unsolicited offers on the phone, mail or email. People may also monitor their account activity more regularly.
I would also think that certain types of traditional fraud schemes are more difficult thanks to technology. Two-factor verification, algorithms that detect unusual activity, better spam detection, credit-report freezes and monitoring are all useful tools for combatting fraud. Financial institutions and professionals are also better informed and equipped to safeguard and educate their clients, which is a good thing.
As trusted advisors, CPAs are well-positioned to protect their clients from fraudulent scams and elder financial abuse before they happen. One of the best ways to help is to learn about some of the most popular scams and educate your clients. With an awareness of what’s out there, clients will be better positioned to recognize a scam before it’s too late.
As clients age, their financial planning needs evolve. Elder planning goes beyond retirement to touch all areas of financial planning, including healthcare, including long-term care, estate planning investment strategy, risk management (insurance) and end-of-life care. AICPA & CIMA ENGAGE has a specific track focused on Elder Planning for advisors looking to incorporate these planning services to meet their clients’ changing needs later in life. According to the U.S. Census, more than 10,000 Americans have been turning 65 every day since 2010 and by 2030, all Baby Boomers will be over the age of 65. This represent both an opportunity and a responsibility for planners to expand their skillset and proactively help their clients and their families address elder planning issues.