• James Robinson CFP

Part 3: Financial Elder Abuse and Health

Updated: May 29, 2018

Financial Stressors - Related Illness

Americans with high levels of debt stress tend to suffer from at least three stress-related illnesses. The findings were supported by medical research that has linked chronic stress to a wide range of ailments.

Financial Stress Related Illness:

  • 27% had ulcers or digestive tract problems.

  • 44% had migraines or other headaches.

  • 29% suffered severe anxiety

  • 23% had severe depression

  • 6% reported heart attacks, double the rate for those with low debt stress.

  • 51%, had muscle tension, including pain in the lower back.

People who reported high stress also had trouble concentrating and sleeping

The WebMD Medical Team who work closely with a team of over 100 nationwide doctors and health experts across a broad range of specialty areas to help us all live a healthier life added credibility to the Associated Press-AOL Health survey.

Gerontologists and other Geriatrics experts concur that financial stressors can spiral downward into a sequence of depression, loss of personal control, decreased emotional functioning, and poor physical health.

As we mentioned in an earlier blog, many victims will experience life-altering effects such as:

  • loss of trust in others

  • depression and anxiety

  • feelings of fear, shame, guilt, anger, self-doubt, remorse, and worthlessness

  • forced to rely on government safety net programs such as Medicaid

  • loss of primary residence

Pure Financial Abuse versus Hybrid Abuse

The National Center on Elder Abuse (NCEA) offers insight into abuse that can occur by itself or in conjunction with other forms of abuse, such as physical abuse or neglect. On one side of the coin you have ‘Pure Financial Abuse;’ and on the other side of the coin is ‘Hybrid Abuse.’

Pure Financial Abuse

Pure Financial Abuse typically involves perpetrators that are non-relatives and not financially dependent on the victim. And it is usually fraud.

Top 10 Financial Abuse Scams Targeting Seniors

  1. Medicare/Health Insurance Scams: In these types of scams, perpetrators may pose as a Medicare representative to get older people to give them their personal information, or they will provide bogus services for elderly people at makeshift mobile clinics, then use the personal information they provide to bill Medicare and pocket the money.

  2. Counterfeit Prescription Drugs: Most commonly, counterfeit drug scams operate on the Internet, where seniors increasingly go to find better prices on specialized medications. The danger is that besides paying money for something that will not help a person’s medical condition, victims may purchase unsafe substances that can inflict or kill.This scam can be as hard on the body as it is on the wallet.

  3. Funeral & Cemetery Scams: The FBI warns about two types of funeral and cemetery fraud perpetrated on seniors. Stranger Attends Funeral: In one approach, scammers read obituaries and call or attend the funeral service of a stranger to take advantage of the grieving widow or widower. Claiming the deceased had an outstanding debt with them, scammers will try to extort money from relatives to settle the fake debts. Caskets and Cremation: Another tactic of a disreputable funeral home is to capitalize on family members’ unfamiliarity with the considerable cost of funeral services to add unnecessary charges to the bill. In one common scam of this type, funeral directors will insist that a casket, usually one of the most expensive parts of funeral services, is necessary even when performing a direct cremation, which can be accomplished with a cardboard casket rather than an expensive display or burial casket.

  4. Fraudulent anti-aging products: Some older people feel the need to conceal their age to participate more fully in social circles and the workplace. They seek out treatments and medications to maintain a youthful appearance, putting them at risk of scammers. Botox scams are dangerous as rogue labs creating versions of the real thing may still be working with the root ingredient, botulism neurotoxin, which is one of the most toxic substances known to science. A bad batch can have health consequences far beyond wrinkles or drooping neck muscles.

  5. Investment Schemes: Senior Citizens are targeted as they plan for retirement. The FBI reports several investment schemes have been targeted at seniors looking to safeguard their cash for their later years. Remember the pyramid scheme of Bernie Madoff?

  6. Homeowner/Reverse Mortgage Scams: In an earlier Blog we discussed that seniors tend to have debt free homes. Scammers like to take advantage of the fact that many people above a certain age own their homes. Scammers can take advantage of older adults who have recently unlocked equity in their homes. Those considering reverse mortgages should be cognizant of people in their lives pressuring them or those that stand to benefit from the borrower accessing equity, such as home repair companies who approach the older adult directly.

  7. Sweepstakes & Lottery Scams: This simple scam is one that many are familiar with and it requires a bit of explaining. Here, scammers inform their mark that they have won a lottery or sweepstakes of some kind and need to make some sort of payment to unlock the supposed prize. Often, seniors will be sent a check that they can deposit in their bank account, knowing that while it shows up in their account immediately, it will take a few days before the (fake) check is rejected. During that time, the criminals will quickly collect money for supposed fees or taxes on the prize, which they pocket while the victim has the “prize money” removed from his or her account as soon as the check bounces.

  8. The Grandparent Scam: God couldn't be everywhere, so he created grandparents Scammers like the grandparent scam because is so simple and so devious as it uses one of older adults’ most reliable assets, their hearts. Scammers will place a call to an older person and when the mark picks up, they will say something along the lines of: ‘Hi Grandma, do you know who this is?’ When the unsuspecting grandparent guesses the name of the grandchild the scammer most sounds like, the scammer has established a fake identity without having done a lick of background research. Once “in,” the fake grandchild will usually ask for money to solve some unexpected financial problem (overdue rent, payment for car repairs, etc.), to be paid via Western Union or MoneyGram, which don’t always require identification to collect. At the same time, the scam artist will beg the grandparent “please don’t tell my parents, they would kill me.” The sums from such a scam are likely to be in the hundreds of thousands of dollars.

  9. Telemarketing/phone Scams: The most common scheme is when scammers use fake telemarketing calls to prey on older people. With no face-to-face interaction and no paper trail, these scams are incredibly hard to trace. Also, once a successful deal has been made, the buyer’s name is then shared with similar schemers looking for easy targets, sometimes defrauding the same person repeatedly. Telemarketing fraud includes: The Pigeon Drop: The con artist tells the individual that he/she has found a large sum of money and is willing to split it if the person will make a “good faith” payment by withdrawing funds from his/her bank account. Often, a second con artist is involved, posing as a lawyer, banker, or some other trustworthy stranger. The Fake Accident Ploy: The con artist gets the Senior Citizen to wire or send money on the pretext that the person’s child or another relative is in the hospital and needs the money. Charity Scams: Money is solicited for fake charities. This often occurs after natural disasters such as Hurricane Katrina. Senior Citizens are motivated to give as they are watching CNN and Fox News as they hammer out the bad news repeatedly. Then the telephone ring or they get a ‘Pop Up’ on the internet.

  10. Internet Fraud: Older people are easy targets for automated Internet scams that are ubiquitous on the web and email programs. Examples includes: Email-Phishing scams - A senior receives email messages that appear to be from a legitimate company or institution, asking them to “update” or “verify” their personal information. A senior receives emails that appear to be from the IRS about a tax refund.

Hybrid Abuse

A major insurance company study revealed that over $2.6 billion is lost annually to financial exploitation. It also says that 55 percent of financial abuse in the United States is committed by family members, caregivers, and friends. This is ‘Hybrid Abuse.’

Hybrid Abuse typically involves perpetrators who are relatives and financially dependent on the victim. On the other hand, the victim is typically financially independent, but physically dependent on the perpetrator. And it usually involves theft.

After caring and nurturing one or two generations, Senior Citizens become prey to family members especially adult children, grandchildren, and other relatives…who become predators. Family members who exploit the elderly typically have close relationships with the victim.

As a Financial Advisor, I have heard and witness horror stories, many including our aging veterans:

  • A grandson sells his grandfather prized gun collection without his or her consent. He thoughts were that he would inherit anyway…and he hates guns.

  • Daughter signing or cashing Social Security checks or a veteran’s widower Survivor Benefit Check. …without permission

  • Financial Elder Abuse could be perpetuated abusing the following legal and financial arrangements:

  • Creating a joint bank account by adding his or her name to an elderly person’s account under the guise of trying to help them with their financial affairs. You know the rest of this story.

  • Disinherited: I was called in to advise a rather wealthy client and found myself in the middle of a misdeed where a son came home (He had been gone for years0 and had transferred the deed to the substantial property in Texas without our client fully understanding the transaction and the consequences of giving away this valued asset. By the time we could gather a legal team…it was too late. This boy had disinherited two generations below him.

  • Disinherited: Predatory caregiver pressured a Senior Citizens who was a widower to change his beneficiary on a significant insurance policy, This also has generation impact as this would disinherit generations.

Predatory Financial Professionals

Certified Financial Planning (CFP) Board adopted the Code of Ethics to establish the highest principles and standards. These Principles are general statements expressing the ethical and professional ideals certificants and registrants are expected to display in their professional activities. The Principles form the basis of CFP Board's Rules of Conduct, Practice Standards, and Disciplinary Rules, and these documents together reflect CFP Board's recognition of certificants' and registrants' responsibilities to the public, clients, colleagues, and employers.

There are other Financial Planning organizations that have adopted Code of Ethics as well. Yet, there are a few Professionals that stray from the path of decency and honesty. When caught, they are severely dealt with by these organizations and the state and federal regulatory agencies as well.

State insurance Commissioners have identified the following as among the most common forms of financial exploitation of older individuals by financial professionals:

  1. Expensive unsuitable variable annuity products that involve high surrender charges and limited access.

  2. Duplicate Medicare supplement insurance coverage. Policies will coordinate payments and pay once. Why would the Senior Citizen pay twice for the same coverage?

  3. high-pressure sales tactics in the sale of life insurance policies, dread disease policies, AD&D policies, and hospital indemnity policies

  4. Free lunch and dinner seminars, masked as educational events, to pressure or entice older consumers to purchase investment or insurance products, regardless of their suitability.

  5. Misleading mailings that purport to be government-approved programs or government-approved final expense/burial plans

  6. Mortgage scams (We discussed earlier)

  7. Recommendations that seniors transfer their investments or cash out their life insurance policies for promissory notes. The SEC obtained a $112 million judgment against investment advisers who induced at least 803 seniors to invest in notes that purportedly paid a "guaranteed" return of 5.5% to 8% per year. The fraudsters claimed that investor funds would be used to make secured loans to businesses and that investors would be repaid their principal at maturity, but these representations were false. [See SEC v. D.W. Heath & Associates, Inc., et al., No. CV 04-02949JFW (Ex) (C.D. Cal.)] .

Know the Signs...

As we mentioned at the beginning of this blog, Americans with high levels of debt stress tend to suffer from stress-related illnesses. These Americans include our Active and Veterans Servicemembers. Known the signs of Financial Elder Abuse. Your health and longevity could depend on it.

Don’t Be A Victim TwiceMany Senior Citizens fear that if they report the abuse and the perpetrator is prosecuted, they will be alone or placed in a nursing home. If you suspect elder abuse, neglect, or exploitation, you should report these concerns to the protective services agency where the Senior Citizen lives to find the reporting contacts for a specific state,

Caution: If the situation is serious, threatening, or dangerous, call 911 or the local police for immediate help.

Resources and References

  • National Center on Elder Abuse |https://ncea.acl.gov/

  • Top 10 Financial Scams Targeting Seniors - National Council on Aging |https://www.ncoa.org/economic-security/money-management/scams-security/top-10-scams-targeting-seniors/

  • FBI List of Common Fraud Schemes: The following are some of the most common scams that the FBI encounters, as well as tips to help prevent you from being victimized. Crime |https://www.fbi.gov/scams-and-safety/common-fraud-schemes

  • Visit the Bureau’s White-Collar Crime and Cyber Crime webpages for information on more fraud schemes. |https://www.fbi.gov/investigate/white-collar-crime

  • Bernard Madoff was a stockbroker who ran his multibillion-dollar firm as a grand-scale Ponzi scheme. He is currently serving a 150-year prison sentence. Biography: |https://www.biography.com/people/bernard-madoff-466366

  • How to Beat the Grandparent Scam| Callers pretending to be grandkids are still targeting older Americans by Richard B. Stolley, AARP Bulletin, January/February 2017 |https://www.aarp.org/money/scams-fraud/info-2016/how-to-beat-grandparent-scam.html

  • Code of Ethics & Professional Responsibility |https://www.cfp.net/for-cfp-professionals/professional-standards-enforcement/current-standards-of-professional-conduct/standards-of-professional-conduct/code-of-ethics-professional-responsibility

  • State insurance Commissioners |http://www.naic.org/state_web_map.htm

  • Investor Alert-Investment Products and Sales Practices Commonly Used to Defraud Seniors: Stories from the Front Line |https://www.sec.gov/spotlight/seniors/elderfraud.pdf

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