The 2017 AARP Investment Fraud Vulnerability Study highlights two troubling trends in the United States. Investment fraud is on the rise and elders are increasingly being targeted.

The AARP Investment Fraud Vulnerability Study “sought to identify differences between known investment fraud victims and the general investor population in three discrete areas: psychological mindset, behavioral characteristics, and demographic characteristics.”

This article extends the AARP’s discussion on elder investment fraud, exploring common schemes, a discussion on why seniors are vulnerable, and methods for prevention and resolution. In preparation, we spoke with a number elder abuse advocates, elder abuse attorneys in California, financial abuse researchers, and contributors to the AARP Study.
According to AARP and FINRA: investment fraud abuse victims tend to be older, male, more financially literate, more educated, have higher incomes and are more open to sales situations than the general public. Additionally, 50% of investment fraud victims were over the age of 70 compared to general investors (35%).
Older citizens are more often victims of fraud than the general population.
51% of fraud victims surveyed were over the age of 70. Additionally, 38.3% of investment fraud victims were between the ages of 50-69.  With nearly 90% of the victims of investment fraud being 50 or older (eligible for AARP), it’s clear scammers prefer a specific subset of the population. Scammers are looking for receptive ears and the path of least resistance to execute their con. This article looks more extensively at the psychological factors that may influence this statistic later, but an anecdotal theory from this data is that scammers understand their audience and are going after receptive ears. For business, salespeople are often given a ‘customer profile’ that provides detailed information on who their ‘perfect customer’ is. It’s likely that scammers employ the same strategy to employ their time most efficiently and execute the most cons.
The AARP study highlights the increase in elder investment fraud particularly among older adult men. Scams often prey on psychological vulnerabilities that include the deep needs of the victims and other factors we associate with aging. Our identities as individuals continue to develop as we age. Aging can present opportunities and challenges to our sense of self, with most individuals eventually obtaining a balance between maintenance of the self and accommodation to changes associated with aging. For others, acknowledging this changes is painful (can no longer run a 5k) and there is resistance to accommodating these changes. In our lab, a working hypothesis regarding scam victimization refers to the desire to continue a “personal fable”. In this fable we can shore up elements of our identity that may be challenged, and serve as the hero / heroine of our personal narrative. Scammers are remarkably adept at identifying these needs and exploiting them.
Michael Hackard heads Hackard Law in Sacramento, California, and possesses 40 years of legal experience with a focus on estate, trust and probate law. Mr. Hackard shared detailed information on legal recourse for California elder investment fraud victims:

“An action against a registered agent with FINRA will likely cause the application of FINRA arbitration procedures. Note – FINRA adopted, effective February 5, 2018, new FINRA Rule 2165 (Financial Exploitation of Specified Adults) that permits “members to place temporary holds on disbursements of funds or securities from the accounts of specified customers where there is a reasonable belief of financial exploitation of these customers; and (2) amendments to FINRA Rule 4512 (Customer Account Information) to require members to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account. [1]

Actions regarding trusts and estates in California are litigated in the state’s probate courts. Such actions do not allow jury trials.
Anne Marie Murphy is a Principal at Cotchett, Pitre & McCarthy LLP in San Francisco, California, where she practices civil litigation with extensive experience litigating elder abuse cases (including both financial abuse and nursing home abuse).

“Depending on the type of investment fraud, seniors may be able to file a financial elder abuse and fraud case in the civil courts – or, if the fraud is related to a brokerage account they may need to pursue arbitration before the Financial Industry Regulatory Authority, Inc. (FINRA). Victims of financial fraud should always consider filing a police report in addition to seeking help from a civil litigator.”
For assistance with this difficult topic, we spoke with elder law expert, Michael Moran, a partner at Moran Law in Santa Ana, California. The first thing Mr. Moran emphasized was that financial abuse of an elder “is a crime, typically a felony, and will be prosecuted if the victim is willing.”
“I estimate 50% of the family financial fraud cases in California involve a member of the family, typically acquiring the power of attorney to defraud their elders,” shared Mr. Moran. The main problem, in terms of resolution, he explained, is “the reluctance of many elders to pursue legal action against family members. A large percentage goes unreported or un-prosecuted because the elder victim believes it was a momentary lapse in judgement by their family member or they are embarrassed about the act or possibly their declining ability to manage their finances.”
Elder Investment Fraud
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Elder Investment Fraud

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