Protecting elderly clients from fraud
As fraud continues to rise, elder Americans remain especially vulnerable.
RIA firms are in a unique position to proactively help clients protect their wealth from scammers.
Trusted Contacts are one of the many ways Schwab works with you and your clients to catch fraud before it happens.
According to the FBI, elder Americans reported $1.7 billion in losses in 2021 due to fraud, a 74% increase from 2020, with the average incident totaling more than $18,000.1
Older people are frequent targets of fraudsters because they tend to be less familiar with technology and fraud schemes, making them more susceptible to scammers. Even well-educated, high-net-worth elders can be duped. In 2021, more than 3,000 elders reported losing more than $100,000 to a scam.1
Many of the most common scams can put assets you manage at risk. There are key steps you can take to help protect your clients from fraud.
What proactive steps can advisors take to stop fraud?
Protecting client assets from fraud requires a multifaceted approach. Here's what many advisors do to help clients stay safe.
- Train staff: Help staff spot signs of diminished capacity, coercion, abuse, or other red flags that financial decisions are not being made in your client's best interest.
- Establish protocols: Create written protocols to guide how your firm should respond if you or your staff notice suspicious activity.
- Provide client education: Help clients spot scams before they happen. Invite a cybersecurity or fraud expert to explain common tricks and what to look for online.
- Keep up with fraud trends: Technology moves fast, and fraudsters are often on the cutting edge. By checking in regularly with a few popular cybersecurity blogs, you may be able to catch the latest scam before it's too late.
- Get insurance: Fidelity bonds can replace lost client assets and protect your firm from catastrophic losses. Cyber insurance can help your firm recover from a cyber incident.
- Monitor account activity: Look for address updates, new phone numbers, and other account changes. Uncommon transactions can also be a red flag. As a general rule, if you see something suspicious, don't be afraid to make a phone call to your client to alert them and get more information.
- Suggest additional planning: Consider opening up a conversation about establishing a Durable Power of Attorney or getting started on general estate planning.
- Be available for conversations: It never hurts to check in with your clients. By reinforcing goals and financial decisions, it can help prevent questionable choices or bring risky activities to the surface. You want your clients to feel that they can come to you rather than getting in deeper with a scammer.
What is a Trusted Contact?
One way Schwab works with you and your clients to prevent fraud is by asking clients to name a Trusted Contact. A Trusted Contact is a person designated by your client whom Schwab can contact when something doesn't look right. This person is also authorized to:
- Confirm your client's current contact information.
- Discuss your client's mental or physical health status.
- Discuss activities or other possible red flags that might indicate your client is being financially exploited.
- Address other limited circumstances when permitted by law.
Establishing a Trusted Contact is optional. It does not give the person Power of Attorney or Durable Power of Attorney. They cannot view account information, execute transactions, or inquire about account activity unless they're given additional permissions. And only your client can add, update, or remove a Trusted Contact from their account.
A Trusted Contact should be close to your client, but ideally isn't someone who already conducts business on behalf of the client. Sadly, many people who take advantage of older people are family members or people who are closest to the victim, so involving more trusted people offers an additional layer of protection.
Be a trustworthy resource for your clients
By taking a vigilant and proactive approach to fraud, you can show your clients that you're looking out for them and that they can trust you to help keep their assets safe.
What you can do next
If you custody with Schwab:
- Learn more about Schwab's approach to protecting senior and vulnerable investors, including how to establish a Trusted Contact.
- Stay ahead of fraud and cybersecurity risks by browsing our cybercrime prevention resources in the Cybersecurity Resource Center or enrolling in our virtual series, Strengthen Your Cybersecurity Program.
- Consider a custodian that invests in your success. If you're thinking about becoming an independent advisor, contact us to learn more about the benefits of a custodial relationship with Schwab.
1. U.S. Federal Bureau of Investigation, "2021 IC3 Elder Fraud Report," https://www.justice.gov/file/1523276/download.