According to late 2022 data from AARP, the rate of elder financial exploitation has increased significantly since the beginning of the COVID-19 coronavirus pandemic. This has emphasized a need for financial professionals serving seniors to continuously monitor client risks, presenting a unique challenge for financial advisors.
This is according to Matt Sommer, a certified financial planner (CFP) and head of the specialist consulting group at Janus Henderson Investors, in a new piece published by Financial Advisor magazine.
“Given this widespread prevalence and the implications financial exploitation could have on clients’ overall well-being, their financial goals and their ability to meet those goals, monitoring and addressing client risk is increasingly a service being provided by advisors focused on strengthening their value proposition and relationships with clients,” Sommer wrote.
This has necessitated additional vigilance on the part of advisors, and to have a strong understanding of potential warning signs to protect older clients from exploitation, he wrote.
“The implications of financial exploitation can not only affect your clients but can also have a meaningful impact on your practice,” his column said.
The first recommendation for financial advisors monitoring client risk is to be on the lookout for potential warning signs, which can be done by both strengthening client relationships and becoming familiar with common forms of financial fraud and abuse.
Abuse can come from many sides, including from other financial professionals and even family members, Sommer explained.
“Financial abuse by a family member might be hard to fathom, but this type of exploitation is not uncommon and can include instances of identity theft, misappropriating family funds for personal use, forging documents or checks, unauthorized use of a family member’s credit card, insurance fraud, financial coercion and more,” he said.
Other sources of fraud can come in the form of investment opportunities or scams that specifically target senior homeowners, including from bad actors who claim to be reverse mortgage proprietors.
“Nobody wants to see their clients impacted by financial exploitation or fraud,” he wrote. “Beyond the obvious implications it can have on a client’s finances, it could negatively impact your practice by depleting staff resources, reducing client satisfaction and trust, and reducing potential referral activity.”
Financial advisors are a highly sought referral source for reverse mortgage professionals, particularly those seeking to position a reverse mortgage as part of a wider retirement plan. However, advisors themselves continue to struggle with seeing reverse mortgages as a viable tool to recommend to certain clients.
Some reverse mortgage companies have taken strides to forge partnerships with the financial advisor community, including Finance of America Reverse (FAR)’s partnership with the Financial Planning Association (FPA) and OneTrust Home Loans’ partnership with Richmond-based Wealthcare Capital Management.
Recently, leaders at Guaranteed Rate explained to RMD that educating financial advisors about reverse mortgage product features will be an initiative undertaken by its new EVP of reverse mortgage lending.
