Did you know approximately 10,000 Baby Boomers turn 65 every day in the U.S.?
According to a 2012 Social Security Administration report, approximately 10,000 members of the Baby Boomer generation reach retirement age on a daily basis. (The Washington Post, July 2014) As each of us age, we experience the effects of age in various areas of life. One area where cognitive decline is often first experienced is in the area of financial risk. This is why Colorado State legislators are pursuing House Bill 17-1253, Protect Seniors From Financial Abuse Concerning the 'Protection of Vulnerable Adults from Financial Exploitation Act'.
The passing of HB17-1253 would allow financial professionals to enact a reasonable window of time, a pause as it were, in the disbursement of client funds when fraud is suspected. As it stands right now, once funds are dispersed, the recovery rate of fraudulently acquired funds is virtually zero.
American Portfolios Denver Managing Director Kris Tower provided testimony before the Colorado State Senate Finance Committee on April 13th, 2017 regarding HB 17-1253. Mr. Tower carries 20 years of experience as a client-facing professional in the financial services industry.
The Financial Exploitation of Vulnerable Adults
According to a 2010 Investor Protection survey of Elder Investment Fraud and Financial Exploitation, one out of every five senior adults age 65 and older has been a victim of financial fraud. (Investor Protection, June 2010) The financial loss due to such exploitation is estimated $2.9 billion on an annual basis. Unfortunately, these numbers are believed to be quite conservative. It is estimated that less than one out of 44 cases of financial fraud or abuse are reported. (National Adult Protective Services Association, May 2017) We believe this needs to change to protect vulnerable adults from financial abuse and fraud.
Four Sources of Financial Abuse and Exploitation of Vulnerable Adults
Vulnerable adults are at significant risk of becoming the next victim of financial scams and sources of abuse. While there are many scams currently targeting vulnerable, we believe there are four familiar ones:
Jamaican Lottery Scam and other contest scams - The Jamaican Lottery Scam is arguably the most prevalent and successful financial scam affecting vulnerable adults today. Estimated losses total over $300M every year in fraudulent ‘processing fees’ or ‘taxes’. (HuffPost, March 2017) Fake Publisher’s Clearing House Sweepstakes, Lucky Winner lotteries, and other scams are often successful at securing a vulnerable adult’s trust through persuasive and then aggressive tactics.
Nigerian Letter Scam - Letter or email recipients are encouraged to share in a percentage of money from an unknown sender trying to export out of a foreign country, such as Nigeria. Recipients are asked to provide their bank information to ensure an easy transfer of funds. Reported losses tied to Nigerian Letter Scams totaled over $12.7B alone in 2013. (GeekTime)
‘Fairytale’ Investment Products - Fraudulent parties often attempt to sell non-existent ‘fairytale’ products to vulnerable adults.
Abuse by Family Members and Friends - Approximately 90% of all abusers of vulnerable adults are family members or trusted individuals, such as caretakers. (NAPSA, May 2017)
At American Portfolios Denver we believe in doing our due diligence to protect investors from making potentially damaging financial decisions. As it stands now, any client order to distribute funds that is received by their financial firm must be processed, regardless of the reason.
This means the ‘Nigerian Prince’ or ‘Jamaican Lottery’ scams, as well as others, are not carefully scrutinized for their legitimacy. With no current delay period in place, the recovery rate of dispersed funds for fraudulent causes is minimal at best. Introducing HB17-1253 would give financial professionals the opportunity to help protect vulnerable adults in Colorado from financial exploitation.
What HB17-1253 Means for Colorado-based Financial Professionals and Protecting Vulnerable Adults from Financial Exploitation
HB17-1253 would allow advisors and firms to truly act in the best interests of their most vulnerable clients without fear of a rule violation. If a financial professional suspects a case of financial exploitation, the professional is then empowered to contact the proper authorities to take appropriate action.
We believe passing this legislation will save vulnerable adults from further exploitation. It is in line with our commitment to serving investors with integrity, proactive counsel, and their best interests in mind. As legislation for HB17-1253 continues through the Colorado State Congress, we will post additional commentary in response.
If you know a vulnerable adult in need of financial investing insight, we welcome you to schedule a meeting with one of our American Portfolios Denver team members. You are welcome to ask any questions that may interest you and give us an opportunity to earn your trust through our evidence-based approach to investing. Start a conversation with American Portfolios Denver today.