As the senior population grows rapidly, bad actors exploiting the elderly are also on the rise. Scams take many forms, both online and in person, but there are financial safeguards that exist to protect seniors, too.
Trusted financial advisors may be in a unique position to recognize the potential for harm, whether it’s a senior investor’s cognitive decline or the early signs of financial exploitation. This article explores how to nip any suspicious activity in the bud.
What is Senior Investment Protection?
In 2024, American seniors lost $4.8 billion in assets to scams, according to the FBI. (That’s roughly the GDP of the Maldives!) Worse yet, the amount of wealth lost to bad actors increased by one-third over the previous year, suggesting that scammers continue to have the upper hand.
Senior investor protections (SIP) are a response to this troubling trend. Trusted firms like LPL Financial have strengthened SIP in recent years to ensure that seniors in their network, along with their financials, remain safe and secure.
We recently hosted a webinar as part of our Fall Education Series, featuring a client representative from LPL who discussed best practices and expert insights from the world of SIP.
Common Red Flags
While scams vary, there are common warning signs that advisors should look out for in their clients’ behavior and financial movement.
- Diminished Capacity: This is a delicate spectrum. A person diagnosed with onset dementia may still be fully functioning cognitively for years to come. The best practice for advisors is to document instances of memory loss, challenges with simple problems, confusion about time and place, or decreased judgment — all of which could be signs of diminished capacity.
- Unusual Access: Advisors should monitor when there’s a change to power of attorney or financial accounts to someone with no clear relationship to the client, especially if it’s not been discussed previously.
- Unusual Activity: Large, unexplained transactions like wire transfers or other investment patterns that have not been discussed can be a sign that something is wrong.
- One recent example is a “gold scam” that involves fraudsters impersonating a government agency that claims the client's identity has been stolen or is associated with a crime, and that they must pay to clear their name. At that point, the client will withdraw funds from their account, purchase physical gold, and then arrange for a courier to pick up the gold.
- Address Change: Monitor when a client’s mailing address — or the address associated with financial accounts — gets changed to an unfamiliar address.
There are state and federal laws designed to prevent adult abuse, neglect, and exploitation, but many of those protections are reliant on compliance professionals reporting their concerns.
Responding to Senior Exploitation
SIP services are an extension of LPL’s Finance, Operations, and Risk team — making them the central escalation point for employees and financial advisors who:
- Have concerns about diminished capacity in a senior or vulnerable adult investor.
- Are worried about possible financial exploitation of a senior or vulnerable adult investor.
- Would like to proactively guard against the potential for harm, such as helping clients prepare for future needs in the event of diminished capacity.
LPL’s team responds to inquiries reporting concerns within 24 to 48 hours. From there, they conduct a thorough investigation — reviewing account details, transactions, and governance documents such as power of attorney and trust documents — and then determine if the case merits further escalation. When necessary, LPL coordinates with law enforcement and adult protective services.
Prepare to Take Action
There’s no sugar-coating the fact that seniors are more prone to financial exploitation these days. However, thanks to Pilot’s partnership with LPL, we ensure our financial advisors have the resources to detect and guard against scams that might endanger their clients’ assets.
Connect with our team to learn more about the longstanding partnership between Pilot and LPL, as well as the range of tools we offer to independent advisors, enabling them to better serve their clients.