08/04/2016
Elder Financial Fraud, Fiduciaries & Financial Planning

Elder Financial Fraud, Fiduciaries & Financial Planning

Scam artists prey on fear and insecurity, often directing their efforts towards the elderly population. Knowing the danger signals to be aware of will help you ward off these swindlers. For example, be wary of anyone blanketing a neighborhood after a storm offering ‘free storm damage assessment,’ or people posing as IRS agents or bill collectors to gather fake debts.

Financial decisions are complicated enough already, but elders that are unfamiliar with new technologies and experiencing natural “cognitive decline” struggle even more. This decline in ‘executive function,’ as it is termed by neuroscientists, is a natural consequence of aging. The part of the brain responsible for decision making simply doesn’t work the way it used to.

There are some people, known as ‘super agers,’ who buck the trend and function at a high intellectual level into their 80s and beyond, but the vast majority of adults experience some level of cognitive decline through the sixth, seventh, and eighth decades of life.

What can be done to prevent financial exploitation? Here are some tips:

When working with a financial professional, be sure that person is a fiduciary.
Many financial professionals work on commission, and while they are obliged to look for ‘suitable’ investments for their clients, they aren’t legally bound to place clients’ best interests first. Fiduciaries, conversely, are.

When financial or estate planning is needed, contact a certified financial planner or elder law attorney, either of whom must operate as a fiduciary.

When approached by a salesperson or contacted over the phone or by mail, consider how the offer is delivered.
One red flag is immediacy. If you are pressured to respond by a certain time, be suspicious. A time-sensitive pitch is a lure and common tactic of swindlers.

How complex is the product?
Often financial products are incredibly complicated, especially if they involve insurance or guarantees. Warren Buffet has an easy rule: If you don’t understand the product, don’t invest in it.

Does the seller promise returns that beat the market?
Even professional investors rarely beat out the market once fees and commissions are subtracted. Selling a product based past returns, whether or not they indeed exist, is a ruse. It is impossible to guarantee future returns unless the product is federally insured.

Watch out for distractions.
If the salesperson is appealing in some way, that could be to distract you from the details of the product or guarantee. Just because the broker seems like a “nice young man” doesn’t mean they are honest and have your best interests in mind. Always evaluate the product, offer, commissions, and fees. The person selling the product has little effect on the actual value of that product.

Financial Planning with OptiFour Integrated Wealth Management

OptiFour Integrated Wealth Management has provided financial planning and implementation, investment strategies, and risk mitigation to clients in and around Washington, DC for over 25 years. For more information on how we can help you realize your life goals with detailed financial and investment strategies, please visit our homepage or contact us today!

Image courtesy of Hugo Chisholm

sort