Capital Conversations (Spring 2019): Seniors, Exploitation and Red Flags

by Laura Hall, CIMA®, AIF®, Senior Portfolio Manager/Director of Client Services, REDW Wealth LLC

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In January 2011, the oldest post-World War II baby boomers began turning 65. Since then, roughly 10,000 boomers have celebrated their 65th birthday every day. By 2029, when the last of this generation approaches retirement age, the Pew Research Center projects that 18 percent of the U.S. will be at least that old. In other words, all “boomers”—those born between 1946 and 1964—will make up nearly one-fifth of the U.S. population and will have reached the traditional retirement age of 65.

“The aging of baby boomers means that within just a couple of decades, older people are projected to outnumber children for the first time in U.S. history,” said Jonathan Vespa, a demographer with the Census Bureau. By 2030, the United States for the first time will have more 65-and-older residents than children, the Census Bureau projects, and by 2035, there will be 78 million people 65 years and older, compared to 76.4 million under the age of 18. That is a lot of senior citizens, and people are noticing. Though not necessarily in a good way.

Estimates are that older Americans lose approximately $2.9 billion a year to a growing assortment of financial exploitation schemes and frauds, according to the 2019 Fraud Book recently released by the U.S. Senate Special Committee on Aging. Criminals, foreign and domestic, are targeting seniors with the goal of depriving them of their savings, including retirement savings. They are being exploited by strangers over the phone, through the mail and online. Even worse, some family members and others whom seniors trust the most may take advantage of that trust.

The Top 10 Scams

Here is a list of the Top 10 most-reported scams in 2018, based on calls made to the Senate Aging Committee’s Fraud Hotline, with details on those that may pose the greatest threat:

  1. IRS Impersonation Scams
  2. Robo Calls/Unsolicited Phone Calls
  3. Sweepstakes Scams/Jamaican Lottery Scams
  4. Computer Tech Support Scams
  5. Elder Financial Abuse
  6. Grandparent Scams
  7. Romance Scams
  8. Social Security Impersonation Scams
  9. Impending Lawsuit Scams
  10. Identity Theft

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IRS Impersonation Scams (No. 1)

According to the Treasury Inspector General for Tax Administration (TIGTA), the IRA Impersonation Scam is the largest, most pervasive impersonation scam in the history of the IRS. More than 2.4 million Americans have been targeted by people impersonating an IRS official. More than 14,700 Americans have lost a total of more than $72.8 million through this scam. At its peak, approximately 20,000 to 40,000 people were submitting complaints about it every week, making it the scam most frequently reported to the Committee’s Fraud Hotline for the past four years.

There are variations of the scam, but generally criminals accuse victims of owing back taxes and penalties, and their threats can range from home foreclosure to arrest, and, in some cases, deportation, if immediate payment is not made by certified check, credit card, wired funds, prepaid debit card or gift card. The fraudsters tell victims that if they immediately pay the amount allegedly owed, the issue with the IRS will be resolved and the adverse action will be cancelled. If you receive this type of call, follow up with a call to your tax preparer to discuss.

Elder Financial Abuse (No. 5)

The illegal or improper use of an older adult’s funds, property or assets is estimated to be $2.9 billion annually, but the amount is likely much higher, as many occurrences are never reported. Those perpetrating these scams may be family members, paid homecare workers, those with fiduciary responsibilities, such as guardians or financial advisors, or strangers who defraud the elderly via mail, telephone, or Internet scams.

Older Americans are particularly vulnerable to financial exploitation because financial decision-making skills typically decline with age. One study found that women are almost twice as likely as men to be victims of financial fraud and abuse. Most victims are between the ages of 80 and 89, live alone, and need assistance with daily activities.

While some states have laws that require financial professionals to report suspected financial exploitation of seniors to the correct local or state authorities, there is no federal requirement to do so. Some financial professionals may fail to report suspected financial exploitation due to a lack of training or fear of repercussions for violating privacy laws. New Mexico is one of several states that has adopted legislation to protect seniors. A provision in the Adult Protective Services Act (27-7-30) contains a “Duty to Report“ provision that states: “Any person, or financial institution, having reasonable cause to believe that an incapacitated adult is being abused, neglected or exploited, shall immediately report that information to Adult Protective Services.” Adult Protective Services is on call for emergent reports of adult abuse, neglect and exploitation 24/7, with five Adult Protective Services Regions serving all 33 counties in New Mexico.

Social Security Impersonation Scams (No. 8)

There are variations of this relatively new scam, but generally, a criminal calls to ask for personal information such as a Social Security Number, date of birth, mother’s maiden name and/or bank or financial account information. Scammers will try to get personal information and offer to help complete a disability application, apply for a piece of medical equipment, or obtain a new Medicare card. Be aware that, like the IRS, Social Security will not call or email to ask for personal information. If someone calls and claims to be with the Social Security Administration, shouldn’t they already have your Social Security Number?

Even the Securities and Exchange Commission (SEC) has noticed. As a result, SEC exams are placing a high priority on protecting investors, especially seniors. As a Registered Investment Advisory (RIA) firm regulated by the SEC, REDW Wealth must be vigilant when working with our senior clients, and watch for any “red flags” that may indicate a need for intervention.

Some “Red Flags” to Watch For:

  • A previously uninvolved relative, caregiver or friend begins conducting financial transactions on behalf of a senior client
  • A sudden change in financial management, such as a change in account authorization or power of attorney
  • Current spending habits that are inconsistent with past spending habits
  • Statements mailed to an address separate from the client’s address of record
  • A senior with new “friends,” particularly if that senior is isolated and there are no relatives in the area
  • A senior who demonstrates an unusual degree of fear, anxiety, submissiveness or deference to a caregiver, relative, friend or other third party
  • Substantial increases in account activity
  • Memory loss, confusion or difficulty in communicating

REDW Wealth is a fiduciary to all of our clients, regardless of their age, and is committed to helping them establish and achieve their financial goals. You, our clients, can be confident our recommendations are based entirely on your needs, made with only your success in mind, and that we are looking out for your best interests.


Manny Lewis

505.998.3213 manny.lewis@redw.com

Meet Manny Lewis, Investment Specialist

Manny joined the REDW Wealth team late last year as an Investment Specialist, bringing several years of experience assisting clients with 401(k) Plans, Pension Plans, and self-directed IRA accounts. He holds a degree in Finance with a minor in Risk Management & Insurance from New Mexico State University, and is currently pursuing an MBA in International Business at New Mexico Highlands University. On a personal note, Manny is a self-professed computer geek and amateur photographer who is also really interested in languages.


Did You Know?

  • The Firm: REDW recently became the exclusive business partner of New Mexico United (NMU), the state’s newly launched professional soccer team. We currently provide tax and accounting services to the franchise, and will play the role of trusted business advisor as NMU becomes more established and expands its operations, to include the potential construction of a new stadium!
  • The Economy: Scientific research in industry and academia has become more intertwined over the years as corporations have gained importance as a funding source. Since 2007, U.S. federal government spending on basic scientific research has plateaued at around $38 billion annually, while corporate funding has roughly doubled in that time, to about $27 billion. Source: Wall Street Journal
  • Our Clients: It is not unusual to read about children moving back in with their parents due to various, mostly economic, factors. We do not hear as much about parents moving in with their children. Kudos to our clients who have remodeled their homes so that a parent is able to move in with them. I wonder which of them has a curfew and who stays up late enough to enforce it?

Copyright 2019 REDW Wealth LLC. All Rights Reserved. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice.