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More Financial Protection For Seniors

Since 2005 the population of individuals aged 65 and over in the U.S. increased from 36 million to over 50 million.  It’s expected to double to nearly 100 million by 2060.  When you take into account the fact that these seniors own over 75% of all financial assets (according to the Securities & Exchange Commission), it is not surprising that they are the primary target of unscrupulous advisors and caregivers, not to mention ordinary scammers.

The National Adult Protective Services Association defines “financial exploitation” as occurring when a person takes the assets of a senior or other vulnerable adult for his own personal benefit through deception, coercion, harassment, duress, or threats.  And as I have written recently, age-related cognitive decline dramatically increases their risk of becoming a victim.  As a result, senior financial exploitation has been a top priority for the SEC for some time.

The good news is that the SEC has just approved the adoption of the Financial Industry Regulatory Authority (FINRA) Rule 2165 (Financial Exploitation of Specified Adults). This rule enables broker/dealers to place a temporary hold on disbursements of funds or securities from the accounts of customers for whom they believe had been victims of financial exploitation. The SEC also approved amendments to FINRA Rule 4512 (Customer Account Information) requiring broker/dealers to make reasonable efforts to obtain the name of and contact information for a “trusted contact person” for their clients whom the broker can contact in cases of suspected exploitation.

While some brokers have expressed concerns that these new rules may put them in the middle of family disputes or other situations where financial exploitation is not clear, I welcome these changes.  With the advent of the internet, seniors have become increasingly vulnerable to what I call financial predators.  It is encouraging that the federal government (via the SEC) is taking positive steps to enable financial custodians to take action to limit the effect these predators can have on our retired citizens’ financial health.  Although the rules do not cover Registered Investment Advisors (such as Cognizant Wealth Advisors), we and other RIAs have also started talking to our clients about identifying trusted individuals with whom we can share concerns about behaviors or activities that might indicate financial exploitation at work.

As I’ve written in the past, I had the experience of working with a client who suffered through a period of exploitation due to declining mental competency.  It ultimately led to a conservatorship under which her adult son had to take over management of her financial affairs.  I found the experience to be painful and sobering, especially regarding the impact it had on her family.   When it comes to financially protecting our seniors, all of us – government, the brokerage industry, financial advisors, family, and friends – have a responsibility to do everything we can.  These latest regulations are a positive addition to our arsenal.

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