Playbook: Protecting the Elderly from Financial Abuse

Due diligence. Adult children can help their parents by aiding in the selection of a financial advisor—gathering qualified referrals from friends and colleagues, participating in the interview process, etc.
Stay in the loop. Be copied on parents' account statements—that way you can review the portfolio strategy and ensure that everything is suitable in terms of trading activity, allocation, and risk tolerance.
Look at trust accounts. These are a way to provide another layer of protection. Trusts allow the donor to provide specificity about how money is invested, controlled during life, and passed along at death. They don't provide a tax benefit, but they do offer another level of control.
Contact the authorities. You can get in touch with the local Protective Services for Adults (PSA) department to report any suspicious activity involving your parents' finances.
List yourself as joint account holder. Not only could you be subject to gift tax and capital gains consequences, but you could neglect other siblings or family members. A joint checking account is fine, but joint status is not appropriate for an investment portfolio.
Let your parents get emotional. Their emotions may cloud their financial decisions. Criminals who commit fraud use an array of influence tactics including friendship, fear, and intimidation.
Go for the tricky stuff. It’s not a good idea to invest in complex or risky financial instruments on behalf of your parents without additional guidance. If it's something you don't understand, enlist the help of your CPA, attorney or others to provide clarity. If it's too complex, take a pass.
Let things get too personal. Your parents should not provide personal information (Social Security numbers, PINs, and account numbers) to strangers or those without valid need for this information.

Protecting the Elderly from Financial Abuse

One potential blight on the "golden years" for many older Americans: They could be the victims of fraud and other financial crime targeted at the elderly.

By Will Andrews

"This is, without a doubt, one of the most critical issues we as regulators are going to face during the next 10 years," says Mary Schapiro, chief executive of NASD.

SEC chairman Christopher Cox points to a number of trends creating a "perfect storm" for increased fraud: A huge number of people suddenly turning older, the prospect of longer lives, and fewer guarantees of financial security. And all the while, an increasing percentage of U.S. wealth will be in the hands of seniors. "Fraudsters will go after seniors because, following the Willie Sutton principle, 'that's where the money is,'" says Cox. The result, according to the SEC chief, could be "an avalanche of investment fraud cases that could injure millions of seniors."

How can you help protect your parents or other elderly people? John Nersesian, managing director of Nuveen Investments, has identified ways that adult children can help shield their elderly parents from financial abuse.


More Playbooks and Tip Sheets