Beverly Hills, CA: A 2015 report produced by True Link Financial estimates that the amount lost by senior citizens through financial elder abuse in the US is at a staggering $36.48 billion annually. That number surges well past a previous MetLife Institute report in 2011 that estimated the amount to be $2.9 billion.
True Link Financial (www.TrueLinkFinancial.com), a California-based company that offers assistance and tools to seniors and their families to prevent elder financial abuse, shares its research data with other groups that are working toward the same goals.
“Yes, it is a monolithic problem, that’s one way to put it,” says respected securities arbitration and litigation lawyer, Philip Aidikoff, whose practice includes pursuing stolen assets on behalf of elderly Americans and their families.
True Link Financial found that “Criminal Fraud,” such as telephone scams, identity theft and other types of explicitly illegal scams, drains seniors of $12.76 billion in assets annually.
Another $16.99 billion is expropriated through “Financial Exploitation,” whereby seniors, often with cognitive problems, are pressured, deceived or duped into essentially consenting to the financial exploitation of their assets.
“Caregivers Abuse” involving family, friends, lawyers, an accountant, or a financial advisor, and others in trusted positions swindle $6.67 billion every year from vulnerable seniors.
Dodgy deals
“My focus is on elder financial abuse that is perpetrated by financial advisers, brokers and the like,” says Aidikoff, from the Beverly Hills firm of Aidikoff, Uhl & Bakhtiari. “That’s the portion that I am concerned about.”
Adikoff is a member of the Public Investors Arbitration Bar Association (PIABA), the largest organization of US lawyers representing investors in arbitration with stockbrokers. A substantial portion of the work that PIABA lawyers do involves seniors that have been unfairly treated by members of the financial industry.
There are very clear rules in the financial services industry to prevent persons with fiduciary responsibility from raiding seniors’ assets; however, those boundaries are violated.
“If you look in the compliance rule book of every broker dealer I am aware of, and I have been doing this for more than 30 years, you will find specific prohibitions about this, and it still goes on,” says Aidikoff. “There are people who just disregard the rules.”
From the Aidikoff files
• There have been all sorts of abuse of practices. Recently, there was a case involving a broker who became the trustee of a very elderly, very infirmed person’s estate and ended up looting it.
• There are situations where the person names themselves the beneficiary of an estate so that when the elder person passes, they are the ones who get paid.
• There are situations where accounts are managed in a way that benefits the advisor and not the elderly client. For example, buying a lot of high commission products that put money into the broker’s pocket but is totally unsuitable for the client. For example, if you are an elderly person and you are concerned about liquidity, the last thing you want to do is invest these folks in illiquid products. Why does that happen? Well, because these illiquid products sometimes pay seven, eight or nine percent to the broker. All the money goes to the broker. It doesn’t benefit the customer, but sure benefits the broker.
When relatives or care workers take advantage of seniors, there isn’t much that can be done to recover those assets. The money is often spent. But when it’s a broker or a financial advisor connected to a real brick-and-mortar investment firm, a skilled lawyer can often make progress and recover cash for seniors or their heirs.
“Frankly, if it’s the caregiver or the nephew or something like that, collectability is often problematic,” says Aidikoff. “When you are dealing with a broker dealer, at least there is somebody that can write a check.
“We don’t chase the actual broker,” he adds. “That is a fool’s errand because the people who generally engage in these kinds of practices don’t have a proverbial ‘pot-to-pee-in.’ But if they are a registered representative of a broker dealer, the broker dealer is liable for what they do.
“Generally speaking, these cases involve going to a FINRA (Financial Industry Regulatory Authority) arbitration if it is a broker dealer. Sometimes you go to different kinds of arbitration or sometimes you go to court,” says Aidikoff.
Advice for protecting seniors’ money
It might seem obvious, but seniors should trust their financial investments only to recognized, established investment firms. Forget about letting somebody’s cousin who’s working out of his basement take control of the money.
“Please work with someone who works with a real company,” says Aidikoff. “Use a brick-and-mortar company that really exists so if something goes wrong, there is somebody there to answer for it.
“And check on the broker’s history and the company’s history. Investors can easily access that information by going to the FINRA website. If the broker or the company has been in trouble, FINRA will have the information. If there are any red flags, dig a little deeper by going to the state’s Central Registry Depository (CRD) for more information.
“Make sure the person is legitimately employed, look at his track record, see how many complaints he has had, and spend a little bit of time on that,” says Aidikoff. “You are about to sign over your money for goodness sake. Don’t just give it to anybody that comes in a suit and has a good line.
“These kinds of cases are always going to happen to some degree,” says Aidikoff. “The crooks are generally one step ahead of the folks that are designed to put them out of business. That being said, you can reduce the probabilities of being a victim. You spend your whole life earning this money. Spend a couple of hours before you hand it over to someone to manage.”
First stop for the last resort
And when things go bad, check the PIABA website (https://piaba.org). You will find a complete list of lawyers across the US who specialize in this kind of work.
Phillip Aidikoff is a past President and Director Emeritus of PIABA. He has also served on the National Arbitration and Mediation Committee of FINRA and currently serves on a FINRA Task Force to improve transparency, impartiality and efficiency of securities arbitration. He has written dozens of research articles and appears in the media regularly. He has been recognized as a California Super Lawyer for 11 years in a row. In September, Aidikoff will be speaking at the Consumer Attorneys Association of Los Angeles (CAALA) conference in Las Vegas (CAALA Vegas 2015).