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June Is National Annuity Awareness Month

Financial exploitation of older adults is rampant, and the problem will only get worse as America’s population continues to age.

In fact, the rate at which adults over the age of 60 can expect to experience financial exploitation—1 in 20—is higher than the incidence of many age-related diseases, according to research published in The Journals of Gerontology. And that’s likely an underestimate because many older adults are unwilling to report exploitation.

The problem is so dire that the researchers called vulnerability to financial exploitation in older adulthood an “an emerging public health crisis, warranting early detection and prevention.”

That early detection and prevention are where the financial services industry can play a role in combating this crisis. By understanding why older adults are more vulnerable to exploitation, financial advisors can put safeguards in place to protect their aging customers and clients.

Why older adults are more vulnerable to exploitation

All adults become more vulnerable to financial exploitation as they age. That’s because the brain shrinks every year as people get older. 

The prefrontal cortex, in particular, is impacted by this shrinking. This is the area that is at the front of the brain and is involved in several functions, including integrating information from multiple sources, advanced forms of reasoning, and the ability to control impulsive responses. It’s the last part of the brain to mature. “And, regrettably, these regions are also the first to go as we get older,” says Dr. Nathan Spreng, a McGill University professor of neurology and neurosurgery who has extensively researched aging and financial exploitation.

Unfortunately, the ability to manage finances and make financial decisions is impacted by this natural cognitive decline that comes with aging. For example, tracking spending, balancing a checkbook, managing cash, and staying on top of multiple accounts can become more challenging. It’s easier to make mistakes and let things slip by as it becomes more difficult to integrate all the information that is needed to maintain your finances, Spreng says.

However, the bigger threat to older adults’ finances is changes to structures of the brain that reduce the red flag signals that are sent up to help avoid potentially negative situations. “It just gets a little bit harder to hear and respond to that intrinsic alarm system that something might be wrong and is off,” Spreng says.

As a result, it becomes harder to recognize risky financial situations and to detect when others are trying to take advantage of you. That’s when the risk of being exploited increases.

How Alzheimer’s and dementia increases vulnerability

When Alzheimer’s disease or other types of dementia come into play, the impact on financial ability can be much more significant. It’s a reality that the financial services industry needs to be prepared for because Streng says that more than 50% of adults older than 85 can expect to develop Alzheimer’s disease.

“[Alzheimer’s] can have very devastating effects on one's finances because there can be a failure to remember some really important financial decisions that were made,” Spreng says. “There can be investments that are potentially made without thinking through and remembering all of the potential implications.” 

What makes matters worse is that those with Alzheimer’s experience a more rapid decline in their financial decision-making and their ability to spot threats. So they are at a heightened risk of being exploited.

Solutions for the financial services industry

Having knowledge of a victim’s financial affairs is a key way to detect financial abuse and exploitation. That’s why those in the financial services industry are in a good position to help protect aging adults. Here are several things that can be done:

  • Encourage power of attorney designations. Talk to clients about the importance of naming a trusted family member as their financial power of attorney. Let them know that this document needs to be drafted before there’s any sort of cognitive decline.
  • Ask clients for trusted points of contact and get signed permission to reach out to those trusted contacts if you suspect clients are experiencing diminished mental capacity. Also, encourage clients to share details about their finances with their trusted point of contact so that person can spot changes in their financial situation as they age and can intervene when necessary. 
  • Know the signs of financial exploitation. Confusion about recent financial transactions, a dramatic shift in spending, uncharacteristic account activity, suspicious signatures on checks, the inability to pay bills despite adequate financial resources, and complaints about no longer having enough money can be red flags of financial exploitation. Pay particular attention to older clients who are accompanied by others and appear to defer to them or to be fearful of them.

And, finally: Get Carefull for your clients.  Spreng says that having a second set of eyes on older adults’ finances can offer them a lot of protection as they age. The Carefull service provides 24/7 monitoring of bank and credit card accounts and alerts users when it spots signs of fraud and money mistakes that are common to older adults—such as duplicate payments, late payments, changes in spending, and insufficient funds to cover scheduled bills. Carefull also provides credit and identity monitoring, as well as $1 million in identity theft insurance.

Spreng also says that it is important for older adults to have a strong social safety net to provide support and help insulate against situations where they can be exploited. So, Carefull allows users to add trusted contacts who can automatically see relevant account details and receive alerts when Carefull spots unusual activity. Users and their trusted contacts can then communicate within the Carefull service to resolve issues that arise.

How Carefull helps banks and advisors grow their business by protecting customers

Carefull partners with insurance companies and financial advisors to provide older adults and their caregivers a smart second set of eyes, all within a seamlessly co-branded environment that puts your business first in the eyes of the customer. 

Build long-term, whole family relationships: Carefull offers a simple way to connect with your older clients’’ trusted family members, which will allow you to bridge generations and help foster the estimated $24 trillion of impending generational wealth transfer.

Protect in-place assets and attract new ones: Prevent “asset flight” when issues arise with older clients by reaching out to family members who have been included as trusted contacts in Carefull to help resolve issues. By keeping family members involved, you can win their trust and bring them in as clients.

Make a bigger impact with less work: Carefull’s proprietary technology leverages machine learning and data analytics to do the work of account monitoring for you.

If you're currently searching for a solution to help you deepen relationships with your current client base and leverage that base for new growth, Carefull and Carefull Pro can help. 

To see Carefull in action and learn more, click here for a demo.

Carefull is a NAIFA partner. For members, you can learn more about Carefull and how to partner within the Member Portal.



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