Sadly, it has become increasingly common for the elderly to become victims of fraud, exploitation or just plain bad advice. An estimated $40 billion is lost every year to investment fraud with losses from seniors totaling as much as $3 billion. 

One in five older Americans over the age of 65 — a total of 7.3 million older Americans — have been victimized financially, according to a 2011 survey conducted by MetLife. Factors like mild cognitive impairment, dementia and early Alzheimer’s may, in fact, make seniors more susceptible to falling victim.

Fraud and financial abuse against elders is more widespread than you may realize — and may be on the rise due to a slower economy and an aging population. It appears in many forms, affecting millions of senior citizens and their families. These crimes go largely unseen; many seniors do not recognize when it happens to them or may be ashamed to speak up if they do.

Watch for abuse

If you have elderly parents or other older family members or friends, you can help them protect themselves. Financial abuse often involves a trusted person — such as a family member, friend or caregiver — stealing or defrauding elders of their assets such as an in-home caregiver stealing physical assets. The worst cases can involve trusted people using power of attorney rights to siphon funds from the unsuspecting elder. Sometimes unlicensed investment advisors or brokers use confusing tactics to sell unregistered products or investment fraud. Seniors who discover they’re being taken advantage of financially by family or caregivers many times do not report it because they are ashamed that they have been victimized and fear the repercussions of making the fact public.

We’ve all heard the timeless admonition, “If it sounds too good to be true, it probably is”— great advice, but the trick is figuring out when “good” becomes “too good.” There is no clear line to distinguish many times. The truth is, we’re all at risk. Anyone with any money is bound to hear from a fraudster at some point. But you can help protect your family and friends by recognizing how investment fraud operates and by reporting suspicious sales pitches and actual scams.

Protect Yourself

When it comes to our elderly parents, family or friends, take a moment to check in with them to ensure that they have the ability to manage their finances confidently and have an adequate support network in place. Many marketing & sales tactics are legitimate, but one key difference is that real deals will still be there tomorrow. So always take the time to stop and think before making a decision. Here are some key strategies you, or anyone you know who fits the profile of a potential fraud target, can use to help you deal with possible fraud.

Just say No

Practice saying “no.” Simply tell the person, “I am sorry, I am not interested. Thank you,” or tell anyone who pressures you, “I never make investing decisions without first consulting my (spouse, son, my attorney or someone else you know).” Tell them, “I will contact you if I am still interested.” Knowing your exit strategy in advance makes it easier to leave the conversation, even if the pressure starts rising.

Verify the person

A legitimate investment professional must be properly licensed, and his or her firm
must be registered with the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) or a state securities regulator—depending on the type of business the firm conducts. In addition with very few exceptions, companies must register their securities with the SEC before they can sell shares to the public. So ask the individual if they are registered and who with, and then verify that with the resources provided.

Talk to someone first

Be extremely skeptical if the person promoting the deal says, “Don’t tell anyone else about this special deal!” A legitimate investment professional won’t ask you to keep secrets. Even if the seller and the investment are registered, it’s always a good idea to discuss these sorts of decisions with family or a trusted financial professional.

Take your name off lists

One easy step you can take to reduce the number of sales pitches you receive is to take your name off of telemarketing and junk mail lists. Businesses that advertise or market their products and services directly to consumers typically purchase or compile their own lists of potential customers. Here is how you can reduce those contacts:

Telemarketing Calls
www.donotcall.gov
call toll-free 888-382-1222

Direct Mail and Email Offers
www.dmachoice.org

Credit Card Offers
www.optoutprescreen.com
call toll-free 888-567-8688

Online Cookie Collecting
www.networkadvertising.org

Most legitimate businesses—including securities firms—will honor your request. So, if you receive a solicitation after taking the steps above, you should be all the more skeptical of the offer.

If a Problem Occurs

If you believe you have been defrauded or treated unfairly— or if you suspect that someone you know has been taken in by a scam—be sure to send a written complaint to a securities regulator. Here’s where you can turn for help:

FINRA Complaints and Tips
9509 Key West Ave.
Rockville, MD 20850
Fax: (866) 397-3290
www.finra.org/complaint
www.finra.org/fileatip

SEC Office of Investor Education and Advocacy
100 F St., NE
Washington, DC 20549-0213
Phone: (800) SEC-0330
Fax: (202) 772-9295
www.sec.gov/complaint.shtml

State Securities Regulator
Phone: (202) 737-0900
www.nasaa.org

A broker or firm:
FINRA BrokerCheck
www.finra.org/brokercheck
(800) 289-9999

An investment adviser:
SEC Investment Adviser
Public Disclosure Database
www.adviserinfo.sec.gov

Any investment seller:
North American Securities
Administrators Association
www.nasaa.org

An insurance agent:
State Insurance Commission
National Association of
Insurance Commissioners
www.naic.org

Jeffery Masters is president of Jeffery W. Masters & Associates, which offers securities through LPL Financial, member FINRA/SIPC. He provides investment advice through Independent Financial Partners, a registered investment advisor. IndependentFinancial Partners and Jeffery W. Masters & Associates are not affiliated with LPL Financial. Jeff is also a locally endorsed investment advisor by Dave Ramsey. Reach Jeff at [email protected].