Liam Gibson, Wealth of Geeks
In January, a Californian financial advisor was convicted of a federal crime and barred from working or being, “associated with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization,” after he pled guilty to fleecing more than $24 million from clients over two decades.
The Ponzi investing company, which Paul Horton Smith dubbed “Northstar,” ran from roughly 2000 to 2020 and exploited hundreds of victims, the majority of whom were elderly.
Smith told his targets Northstar was an annuity-like product that invested in real estate or the stock market, while pocketing their retirement savings.
The case is but one example of a worrying trend: scamming the elderly is on the rise nationally. According to the FBI’s Internet Crime Complaint Center, reports of elder fraud increased by 14% in 2023, while associated losses increased by about 11%.
Elder fraud takes many forms, from spoof prizes to fake emergencies involving “grandchildren.” The scammers snatch away more than $3 billion per year from old people, many of whom are particularly financially vulnerable.
Recent cases involve AI-generated voices that perfectly mimic the target’s loved ones, making for even more convincing, hyper-realistic scenarios.
With the widening “tech gap,” the elderly are particularly vulnerable to such ploys. How can they stay vigilant and avoid being tripped into a disaster?
We consult financial advisors on the best practices for staying financially safe in one’s twilight years.
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It takes all kinds
Scams run the gamut, from telemarketers offering fake prizes to government agency impersonators. Fraudsters contact unsuspecting Americans and claim they’re with the Internal Revenue Service, Drug Enforcement Administration, or Federal Bureau of Investigation. Then they demand money to mitigate threats of legal action. Criminals may also pose as health insurance companies and other organizations to steal personal information.
Lonely seniors are also susceptible to romance scams. Perpetrators evoke emotional excitement and forge intimacy, exploiting older Americans’ vulnerability and trust.
These differ from investment scams, which coerce victims to invest in nonexistent schemes.
Before making rash financial decisions, do homework first to avoid sham advisors. “To verify the background of an advisor, utilize BrokerCheck and the IAPD (Investment Adviser Public Database),” says Caleb Vering, an Associate Wealth Advisor at Farnam Financial.
These free government-run tools allow people to research the background and experience of financial advisers and wealth management firms. Other industry resources, like Wealthtender, include profiles with financial advisor reviews, establishing legitimacy and offering insights into clients’ experiences with advisors.
Remember: there is always time to sound the alarm.
“If you believe you have been a victim of a Ponzi scheme, consult with an attorney,” says Vering. “You can file a complaint directly with the SEC and FINRA, the regulatory bodies of financial advisors, if you believe you are the victim of a Ponzi scheme.”
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Transparency is key
Professional advisors should always be upfront and transparent to establish trust among new clients. Everything from sharing how much the financial advisor charges to their education and experience should be accessible on an advisor’s website and available upon request.
“I ensure my clients know I’m a legitimate advisor by being transparent about my qualifications, certifications, and professional background,” says Arielle Tucker, CFP and Founder of Connected Financial Planning.
“I encourage clients to verify my registration and disciplinary history on regulatory websites. Since we work with large, well-known custodians, our clients can access information about their investments 24/7.”
Most reputable advisors do not need to take control of your funds to guide your investment strategy.
“We never take possession of our client’s funds,” Tucker says. “Even for clients who want us to do everything for them. I also emphasize the need to understand the investment strategy and to ask for clear, written explanations of how the investments work.”
—————
Custody battle
“One of the easiest ways to ensure clients I am a legitimate advisor is the concept of custody,” says Carman Kubanda, Financial Planner at Innovative Wealth Building. “The custodian, like Schwab or Fidelity, should be a reputable one and clients should be able to see all account activity.”
Consumers can remove advisors not acting in a client’s best interest from accounts by contacting the investment provider or custodian. No permission from the advisor is needed.
In addition to the above tools and precautions, seniors should continue their financial education. Many community centers, libraries, and senior organizations offer workshops and resources on financial literacy and fraud prevention.
Building a solid support network of family and friends who can offer a second opinion on financial decisions is also invaluable. Staying abreast of common scams by reading the news and being updated with technology can go a long way, too. Remember that being informed and aware is the best strategy when protecting yourself and your finances from financial predators.
The Ponzi investing company, which Paul Horton Smith dubbed “Northstar,” ran from roughly 2000 to 2020 and exploited hundreds of victims, the majority of whom were elderly.
Smith told his targets Northstar was an annuity-like product that invested in real estate or the stock market, while pocketing their retirement savings.
The case is but one example of a worrying trend: scamming the elderly is on the rise nationally. According to the FBI’s Internet Crime Complaint Center, reports of elder fraud increased by 14% in 2023, while associated losses increased by about 11%.
Elder fraud takes many forms, from spoof prizes to fake emergencies involving “grandchildren.” The scammers snatch away more than $3 billion per year from old people, many of whom are particularly financially vulnerable.
Recent cases involve AI-generated voices that perfectly mimic the target’s loved ones, making for even more convincing, hyper-realistic scenarios.
With the widening “tech gap,” the elderly are particularly vulnerable to such ploys. How can they stay vigilant and avoid being tripped into a disaster?
We consult financial advisors on the best practices for staying financially safe in one’s twilight years.
—————
It takes all kinds
Scams run the gamut, from telemarketers offering fake prizes to government agency impersonators. Fraudsters contact unsuspecting Americans and claim they’re with the Internal Revenue Service, Drug Enforcement Administration, or Federal Bureau of Investigation. Then they demand money to mitigate threats of legal action. Criminals may also pose as health insurance companies and other organizations to steal personal information.
Lonely seniors are also susceptible to romance scams. Perpetrators evoke emotional excitement and forge intimacy, exploiting older Americans’ vulnerability and trust.
These differ from investment scams, which coerce victims to invest in nonexistent schemes.
Before making rash financial decisions, do homework first to avoid sham advisors. “To verify the background of an advisor, utilize BrokerCheck and the IAPD (Investment Adviser Public Database),” says Caleb Vering, an Associate Wealth Advisor at Farnam Financial.
These free government-run tools allow people to research the background and experience of financial advisers and wealth management firms. Other industry resources, like Wealthtender, include profiles with financial advisor reviews, establishing legitimacy and offering insights into clients’ experiences with advisors.
Remember: there is always time to sound the alarm.
“If you believe you have been a victim of a Ponzi scheme, consult with an attorney,” says Vering. “You can file a complaint directly with the SEC and FINRA, the regulatory bodies of financial advisors, if you believe you are the victim of a Ponzi scheme.”
—————
Transparency is key
Professional advisors should always be upfront and transparent to establish trust among new clients. Everything from sharing how much the financial advisor charges to their education and experience should be accessible on an advisor’s website and available upon request.
“I ensure my clients know I’m a legitimate advisor by being transparent about my qualifications, certifications, and professional background,” says Arielle Tucker, CFP and Founder of Connected Financial Planning.
“I encourage clients to verify my registration and disciplinary history on regulatory websites. Since we work with large, well-known custodians, our clients can access information about their investments 24/7.”
Most reputable advisors do not need to take control of your funds to guide your investment strategy.
“We never take possession of our client’s funds,” Tucker says. “Even for clients who want us to do everything for them. I also emphasize the need to understand the investment strategy and to ask for clear, written explanations of how the investments work.”
—————
Custody battle
“One of the easiest ways to ensure clients I am a legitimate advisor is the concept of custody,” says Carman Kubanda, Financial Planner at Innovative Wealth Building. “The custodian, like Schwab or Fidelity, should be a reputable one and clients should be able to see all account activity.”
Consumers can remove advisors not acting in a client’s best interest from accounts by contacting the investment provider or custodian. No permission from the advisor is needed.
In addition to the above tools and precautions, seniors should continue their financial education. Many community centers, libraries, and senior organizations offer workshops and resources on financial literacy and fraud prevention.
Building a solid support network of family and friends who can offer a second opinion on financial decisions is also invaluable. Staying abreast of common scams by reading the news and being updated with technology can go a long way, too. Remember that being informed and aware is the best strategy when protecting yourself and your finances from financial predators.
