How Can Older Investors Avoid Financial Fraud?

Protecting Older Investors from Predatory Financial Advisors

Because they have amassed large retirement savings, older investors are frequent targets of investment fraud. After all, that’s where the money is. The cognitive decline that often accompanies the aging process can also make senior investors more vulnerable to exploitation.

Financial Frauds Target Seniors

Today, Americans over the age of 50 account for more than three-quarters of the financial assets in the United States. As this population ages, the rate of senior investment fraud is also expected to increase. By 2030, seniors over the age of 65 will make up 18 percent of the country’s population. According to the Securities Industry and Financial Markets Association, one in five seniors has fallen victim to financial fraud. In total, seniors lose at least $2.9 billion annually to financial exploitation.

Studies have shown that financial decision making is frequently the initial cognitive function to deteriorate. Accordingly, many cases of financial exploitation go undetected by friends and family members until it’s too late. In addition, the rate of cognitive decline varies greatly among seniors, with some suffering deficits in their early 60s and others functioning fully well into their 90s.

Protecting Vulnerable Friends and Family

We are asked, from time to time, to represent an elderly or disabled adult who has been taken advantage of by a broker or trusted financial advisor. In many cases, the victims have suffered substantial losses in their accounts through a fraudulent investment scheme, churning or neglect. We recently resolved a claim against an investment broker at a major brokerage who obtained and used our client’s password to access her cash machine and withdraw substantial funds with her knowledge, calling it a loan. It was never repaid and amounted to theft, for which he was fired and a settlement was negotiated.

If you have a relative or friend who has become infirm through age, health or accident, and who has accounts requiring attention and proper financial management, be aware that they are vulnerable to fraud and outright theft. It is worthwhile to initiate a discussion with a potential victim, asking them to allow you, their accountant, lawyer or some other knowledgeable person whom you trust to view their account statement to verify that nothing untoward has occurred.  We have often seen persons in declining health or weakened mental state taken advantage of by unscrupulous advisors. The perpetrator can even turn out to be a person who had no prior record of violation, but found himself in debt and saw the victim as a potential solution.  

Cautionary Example of Investment Fraud

Earlier this month, an Ohio federal court sentenced a former Ameriprise Financial adviser to five years in prison for bilking vulnerable investors out of more than $1.1 million. According to the Department of Justice, Mark F. Speakman persuaded his clients to remove their funds from their Ameriprise accounts and invest them in Centrax, a fraudulent real estate investment trust (REIT). Rather than investing the funds in real estate, he stole the money and used it to pay his own expenses.

Speakman persuaded one victim to move $125,000 outside of her normal Ameriprise account and invest instead in Centrax. When the victim later developed terminal cancer, she detailed her physical decline in emails to Speakman and instructed him to write checks to an estate-planning attorney and to pre-purchase cremation services. She also informed Speakman that she was relying on the REIT to avoid burdening her family members when she died and planned to use the investment to pay off the mortgage on her home.

Because the REIT did not exist, Speakman convinced the victim not to liquidate her purported Centrax investment. When she died, he also attempted to convince the victim’s family to do the same. When he could no longer delay their liquidation requests, he stopped responding to their communications.

“Mark Speakman committed a serious fraud that lasted more than a decade,” U.S. Attorney Glassman said. “He used his position as a financial advisor to take advantage of clients. Appallingly, he even lied about the final financial wishes of a client who was dying of cancer. The sentence he received today reflects the seriousness of his illegal actions.”

If you suspect that a loved one may have fallen victim to investment fraud, it is imperative to act quickly. An experienced attorney can help deter additional financial hardship and pursue legal action to recover prior losses. So if you have any questions or if you would like to discuss the matter further, please contact me, Dan Brecher, at 201-806-3364.