Journalist Pamela Yip explores an all-too-common problem: the financial abuse of older people. She wrote this article while supported by a Journalists in Aging Fellowship sponsored by the Silver Century Foundation, as part of a fellowship program created by New America Media and the Gerontological Society of America. The article first appeared in the Dallas Morning News (TX) on June 18, 2015, and is also posted at the New American Media website. It’s reprinted here with permission.
Barbara Macari’s husband, Frank, always handled the investments in the family. Then one day, Frank, a real estate broker, gave his wife the shock of her life.
“I was coming down the stairs, and he came to me and said, ‘I don’t understand money anymore,’” Barbara said. “I was just shocked because this was something that he had always handled, and handled it beautifully. He made a lot of money on investments. He was smart, he was astute, he was careful, and all of a sudden, he didn’t understand anything.”
A couple of months later, Frank, 74, was diagnosed with Alzheimer’s disease.
How to Protect Someone against Financial Abuse
So how can you protect your elderly loved ones from financial abuse?
For starters, be active in their lives and aware of who’s in their circle. Be especially vigilant of sudden “friends.”
“Run background checks on caregivers or financial advisers,” said Julie M. Krawczyk, director of the Elder Financial Safety Center at the Senior Source in Dallas, TX. “Accompany an older adult to important appointments, including a financial adviser, bank or lawyer.”
But it’s not just outsiders you need to be wary of.
“Most exploitation of a senior is done by a family member,” said Lynne Egan, chairwoman of the Committee on Senior Issues & Diminished Capacity at the North American Securities Administrators Association.
You should also watch for warning signs of cognitive decline that could affect your loved one’s ability to handle money.
“He can no longer write checks,” said Barbara, 72. “He doesn’t even carry money with him because he doesn’t understand it.”
The Macaris, who live in Dallas, TX, are far from alone.
An estimated 5.1 million people age 65 and older have Alzheimer’s disease or other dementias that eat away their ability to manage their financial affairs. With 10,000 people turning 65 every day for the next decade and a half, the number of seniors dealing with cognitive decline is expected to keep rising.
That means that seniors, with a median household net worth of $170,500, will be more vulnerable to financial exploitation, whether it’s a scam by crooks who prey on the elderly or theft by someone they trust.
“It’s a huge problem,” said Daniel Marson, professor of neurology at the University of Alabama at Birmingham. “It’s like a 2,000-pound elephant. Where do you start? Poor financial decision making and financial exploitation, financial elder abuse are rampant.”
It’s easy to see why today’s seniors are an easy mark for crooks.
“The seniors hold the majority of the wealth in this country,” said Lynne Egan, chairwoman of the Committee on Senior Issues & Diminished Capacity at the North American Securities Administrators Association. “They’ve saved up for retirement, they’ve got the 401(k) that they’ve rolled over into the qualified plan, they’ve sold a home to downsize, they’ve sold a business, they’ve inherited and they’re ripe for the plucking by the con artists.”
As we grow older, it’s normal to experience some degree of cognitive impairment, Marson said.
“All older adults experience normal cognitive aging as they grow older,” he said. “Whether this normal cognitive decline causes actual problems in their everyday life and functioning will vary across individuals and their living situations.”
But there’s no doubt that many older adults will experience severe cognitive problems.
America’s elders lose more than $36 billion a year to financial abuse, and that’s probably a low estimate.
“Thirty-five percent of everybody over the age of 71 will have some form of dementia,” said gerontologist Robert Rousch, director of the Texas Consortium Geriatric Education Center at Baylor College of Medicine in Houston.
In the financial realm, cognitive decline means a loss of “higher-order functional abilities” affecting a broad range of skills from counting coins to managing a checkbook, experts say.
Loss of those skills can have severe consequences for seniors, who lose $36.48 billion a year to financial abuse, according to a study by True Link Financial. Even that may be conservative.
“Since so much abuse is never uncovered, this is undoubtedly still a low estimate of the true cost,” said Kathleen Quinn, executive director of the National Adult Protective Services Association.
True Link, which provides financial tools to help protect older adults from being victimized, said seniors annually lose:
- $16.99 billion to financial exploitation, defined as when misleading or confusing language is used—often combined with pressure tactics that take advantage of cognitive decline and memory loss—to obtain a senior’s consent to take money
- $12.76 billion to explicitly illegal activity, such as scams or identity theft
- $6.6 billion “to deceit or theft enabled by a trusting relationship, typically a family member but sometimes a paid helper, friend, lawyer, accountant or financial manager”
Mark and Kent Olds of Dallas said their 79-year-old mother, Gail, has dementia and was exploited by a caregiver who took about $7,500 from her.
“This lady took Mom to the credit union on two different occasions,” Mark said. “Mom gave this lady $6,000, $7,000 one time, a grand another. We noticed a few other things missing before we could put the stops on it.”
The financial losses of seniors aren’t limited to what others do to them. They often hurt themselves by being too trusting and generous with their finances.
“When my mother was about 65 years old, she began giving money to anyone who asked, including those who just knocked on the door,” said Tom Murphy, a Dallas certified financial planner. “She had always been a generous woman, but my father eventually realized something was wrong.”
His father, also named Tom, eventually took the family and business checkbooks away from his wife, who was later diagnosed with Alzheimer’s disease.
“In my mind, there was no problem in her handling money until we recognized that she was having a severe deterioration into dementia, Alzheimer’s variety,” said the 88-year-old father, who lives in Hillsboro, TX.
Cognitive decline also can cost seniors the ability to handle simple financial tasks.
In the Olds family, Gail once had her power cut off because her bill was overdue. Kent was able to pay the bill and have the power restored.
“Mom had fires everywhere, not paying bills,” Kent said. “She said, ‘I can handle it, there’s no problem, there’s nothing wrong.’ We let that go for a while, but this is getting ridiculous.”
“Our ability to make financial decisions starts to decline at about the time it becomes more important that we protect our nest egg because we don’t have time … to earn back losses ….”
For her part, Gail said she still controls her own finances. “I’m managing my money,” she said. “I pay my own bills.”
But her sons, who are seeking guardianship over their mother, said they have arranged for her bills to be paid through automatic deduction from her bank account.
“She’ll get the bills that come in and she’ll write a note to herself, ‘I need to call them, I need to call them,’” Kent said. “Then when she calls, she doesn’t know what she’s talking about” because she believes she already paid the bills.
Cliff Brunette’s experience with his mother was similar.
“She went through the normal aging cycle where she was starting to get confused with the mail coming and what needed to be paid and what was an advertisement or what was a prenotice to a bill, especially when it came to medical,” said Brunette, a volunteer at the Senior Source’s guardianship and money management program.
“She would get multiple statements from insurance companies and doctor’s offices and Medicare,” Brunette said. “She would start to panic a little bit, and she would start to write checks out. I’d go over and I’d say, ‘Wait, you don’t owe this yet.’”
His mother, who died about 10 years ago, eventually needed his help.
“It got to the point where I told her, ‘Just put a shoebox next to your kitchen table. When this stuff comes in, just throw it in there. When I come over to visit, we’ll go through it together,’” Brunette said.
Worst Possible Time
The deterioration in financial skills couldn’t come at a worse time for seniors, said Egan of the North American Securities Administrators Association.
“Our ability to make financial decisions starts to decline at about the time it becomes more important that we protect our nest egg because we don’t have time on our hands to earn back losses that may have occurred,” she said.
Because of the potential for financial exploitation of seniors, outside institutions including banks, health care providers, lawyers and financial advisers have developed policies and training to detect telltale signs.
Egan said bank employees can be the first line of defense against financial exploitation because they often get to know their elderly customers.
“They are the first hands on deck to see that something’s not right,” she said.
Glenda Coffman, a relationship banker at Chase’s Park Cities branch, proved Egan’s point when she saved an elderly customer from sending $30,000 to a would-be scammer.
The customer had approached the teller he usually deals with and asked to withdraw cash. Since the amount was larger than he normally took out, the teller referred him to Coffman.
“He said he needed to get some money to help out his grandson,” she said. “He wouldn’t give me too much information about the transaction, just that he wanted to help his grandson. I got him his money and he went on his way.”
He returned the next day and asked to withdraw more money, and the next—but this time he wanted to withdraw $30,000. That’s when the red flags really started waving.
Coffman questioned him again, and this time the customer was more forthcoming. He told her that his grandson had gotten into some trouble and that he needed to pay legal fees.
Coffman encouraged him to talk to his daughter—his grandson’s mother—but the man eventually withdrew $30,000 and left.
There was a happy ending because the bank trains its employees to spot financial abuse.
“I knew at that point—I absolutely knew—that something was definitely wrong,” Coffman said.
The next day, the customer’s daughter came to the bank and redeposited the $30,000. The grandson wasn’t in legal trouble after all.
“She was thankful that I had spoken with her father, and apparently he thought about what I said and called her,” Coffman said.
Coffman chalked up the happy ending to the training that Chase gives its employees on how to spot financial abuse of the elderly.
“One of the things we try to do is to get to know our customers and their families, if at all possible, just so when stuff like this occurs, it pops out at you.”
The Investor Protection Trust, a nonprofit investor-education organization, works to educate doctors, nurses and other frontline medical professionals to recognize when their older clients may be vulnerable to—or victims of–financial abuse.
The organization supplies a pocket guide that suggests questions medical professionals should ask their elderly patients to determine financial capacity: Who manages your money daily? Do you run out of money at the end of the month? Do you regret or worry about financial decisions you’ve recently made?
The trust operates a similar program for lawyers.
Egan’s group, the North American Securities Administrators Association, has made expanding and strengthening protection for senior investors a top item on its congressional agenda. She said it’s sorely needed.
“We’ve got a population that’s aging over time, so we’re seeing a trajectory to a higher number as we move forward, as the baby boomers start to retire,” Egan said. “It takes a while to get good policies and procedures and laws in place. We need to act now before it’s too late.
“It takes a village of people to protect a senior.”
Where to Get Help
Elder Financial Safety Center: The center helps older adults avoid the dangers of financial uncertainty and exploitation. Call 214-525-6130 or 214-823-5700, or email email@example.com.
The Financial Industry Regulatory Authority: The regulatory body of the securities industry has a toll-free help line for senior investors. Call 844-574-3577.
The North American Securities Administrators Association: The association’s Senior Investor Resource Center provides tools to help senior investors protect themselves from investment fraud. www.nasaa.org/1723/senior-investor-resource-center.
The Consumer Financial Protection Bureau: The CFPB offers a wealth of information and resources for seniors. www.consumerfinance.gov/older-americans.
The late Pamela Yip was a reporter and business columnist. From 1999 to 2015, she covered aging issues as well as personal finance for the Dallas Morning News, drawing on her training in economics, financial planning and retirement concerns. She won fellowships and contributed to a 2010 award-winning series on the high cost of health care. Mike Wilson, editor of the News, said Yip “wrote about personal finance with the authority of an expert and the reassuring voice of a good friend.” She died in October, 2015, at 59.