Beware of the 'New Friend'
Your elderly mother now has a new best friend who goes with her everywhere. Your mom has always been frugal but now lavishes pricey gifts on her new friend. And now your mom doesn't seem to have time for you.
Is something sinister happening or she just living it up? Those are difficult questions that can arise in cases of "undue influence," in which a predator takes advantage of their position of trust or power to gain control over the victim's decision-making, to line their own pockets. The predator could be the new "best friend," financial advisor, adult child or someone else close to the victim. And while anyone can fall victim to undue influence, those most vulnerable are older, more isolated individuals.
Undue influence plays a role in most cases of financial abuse, according to Dr. Bennett Blum, a physician specializing in forensic and geriatric psychiatry who serves as an expert witness in elder abuse cases. Seniors lose about $6.7 billion a year to family members, friends, caregivers, financial advisors or others who exploit their roles for financial gain, according to a report by the San Francisco financial services firm, True Link Financial.
It's a growing problem, elder abuse experts say, as the population grows. And it may be far greater than any statistics can demonstrate. "At best, 80% of cases are never reported to anyone -- and at worst, 95%," Blum says. In most cases, victims are manipulated, rather than threatened or coerced, so they don't even realize they're victims. And if they do realize what's happening, they may be reluctant to speak up for fear of retribution from the perpetrator -- or fear that the government authorities or family members will think they can no longer take care of themselves, Blum says.
As concern over the issue grows, new rules may help prevent some of the financial fallout. Financial Industry Regulatory Authority rules that took effect this year, for example, require brokers to ask clients for the name of a trusted person they can contact and allow them to place a temporary hold on disbursements from an older client's account if they suspect the client is a victim of financial exploitation.
Such rules can't prevent every case of undue influence. John Waszolek was a broker at UBS when one of his elderly clients, a widow, was diagnosed with Alzheimer's in 2008. Shortly thereafter, Waszolek took the client to meet an estate planning attorney who prepared a health care power of attorney and living will naming Waszolek as the widow's agent. Waszolek referred the client to a second attorney, according to the complaint, who prepared an amendment to her trust, naming Waszolek as beneficiary of about $1.3 million in trust assets. When Waszolek moved to Morgan Stanley -- and after her death in 2010, he attempted to collect the assets (which had grown to $1.8 million).
He didn't succeed. The trustee refused to distribute the cash without Morgan Stanley's approval -- and they didn't approve. Waszolek consented to a settlement that barred him from the industry.
Safeguards to Help Stop Senior Scammers
How can seniors and their loved ones prevent this scenario? One way is to stay connected, says Lisa Nerenberg, executive director of the California Elder Justice Coalition. If a loved one suddenly withdraws from social circles, or someone seems to be interfering -- such as a caregiver telling visitors that the senior doesn't want to see them -- that's a red flag, she says.
Another preventive step: Create some checks and balances if you're asking other people to help manage your money as you age. When designating a financial power of attorney, for example, you can name two people to serve as co-agents.
There are services, such as EverSafe, for example, which helps monitor financial accounts for changes in spending patterns or suspicious activity, and you can name a trusted friend or advisor to help you keep tabs on your accounts.
If you suspect a senior is falling victim to undue influence, try asking for the help of a friend or relative whom the senior trusts, Nerenberg says. But the senior may deny anything is wrong. If you're concerned, report the issue to Adult Protective Services.