Elderly targets for exploitation

PLANNING AHEAD: Entwistle Financial Life Planning founder Bill Entwistle says the elderly are susceptible to scams because of their age and their accumulated assets. Above, he speaks with paraplanner Terry Hazel in his South Kingstown office. / PBN PHOTO/BRIAN MCDONALD
PLANNING AHEAD: Entwistle Financial Life Planning founder Bill Entwistle says the elderly are susceptible to scams because of their age and their accumulated assets. Above, he speaks with paraplanner Terry Hazel in his South Kingstown office. / PBN PHOTO/BRIAN MCDONALD

Elderly Rhode Islanders, like older adults across the nation, may be particularly vulnerable to financial exploitation by unscrupulous individuals presenting themselves as legitimate estate and retirement planners.
“Recent studies suggest that financial exploitation is the most common form of elder abuse and that only a small fraction of incidents are reported,” according to the U.S. Securities Exchange Commission, which released guidelines on Sept. 24 about privacy requirements under the Gramm-Leach-Bliley Act, which gives consumers at financial institutions the choice to opt out of providing personal information to a third party.
“Older adults are often targeted because they have retirement savings, accumulated home equity and other assets. They are also more likely to experience cognitive decline, which can impair their capacity to recognize financial exploitation and scams,” the SEC said in the release.
The SEC and other federal agencies warn that older adults may be taken advantage of by scam artists, financial advisers, caregivers or family members.
“My average client is 66 years old and a lot of them are widows. They are ripe for this type of exploitation,” said Bill Entwistle, whose firm Entwistle Financial Life Planning, does about 75 percent of its work in retirement planning.
“Some investments come with high fees. Sometimes a bank will sell a person an annuity and they don’t know they’re paying a commission,” said Entwistle, who is a certified financial planner. “If a bank representative doesn’t fully disclose what they’re proposing for this client to buy, the client may not know their money is not fully liquid or not insured.”
Though he admits a bias for his specialty as a fee-only financial planner, that way of working can avoid a lot of potential conflicts of interest, Entwistle said. “I don’t sell any products. I don’t accept any commissions. It’s 100 percent fee-only,” said Entwistle. “I’m a registered investment adviser and I am required by law to do what’s in the best interest of the client.”
Registration is with the state, where he is registered, for investment advisers with less than $100 million under management, Entwistle said. Investment advisers with more than $100 million under management register with the SEC.
One important piece of advice for senior citizens is never to be in a hurry to offer personal financial information by phone, by email or in person, he said.
“The first thing I do is have them come in and meet with me and not bring any paperwork or personal information,” said Entwistle.
“Usually, they’ve had some type of transition – they’ve lost their job or been offered early retirement or their spouse died and they’re overwhelmed and need someone to help put the pieces of the puzzle together,” said Entwistle. “They have so much to think about – social security, maybe a 401(k) and they’re getting different advice from peers and relatives. So first of all, they just want to sit down with someone they can trust.”
Finding a trustworthy planner can be tricky, especially because many are listed online and it can be hard to tell whether all the initials by their name actually signify legitimate training and ethics.
“I advise people to ask friends and relatives for referrals or to ask their accountant or attorney,” said Entwistle.
Financial scams can arrive via email, regular mail or phone. Some scammers attract people with that constant favorite – food.
State officials have received an average of two complaints per year over the past seven years that involved fraud against a senior citizen, according to Maria D’Alessandro, deputy director for the Securities Division of the Rhode Island Department of Business Regulation. One case in 2011 involved the fraudulent sale of $5 million worth of promissory notes to a senior investor. The broker was convicted in U.S. District Court for mail fraud and tax fraud, ordered to pay $10.1 million and barred from the securities business, said D’Alessandro. The brokerage firm was required to reimburse the investor $4.4 million for losses incurred and pay a $250,000 fine to the Securities Division.
A case in 2006 involved the sale of 182 variable annuities to seniors over the age of 75. After the business practices of the investment adviser were reviewed by an outside consultant, the financial adviser was required to pay an $800,000 fine to the Securities Division, said D’Alessandro. The adviser was also required to offer rescission, or cancellation, of contracts to the senior citizens.
Variable annuities combine tax-deferred investment options with a life-insurance element and generally have higher fees and longer-term surrender periods than other types of brokerage accounts, D’Alessandro said.
To deter financial abuse of the elderly, Rhode Island adopted Rule 501-1 on Senior Specific Certifications and Professional Designations in January 2011.
The rule “prohibits the use of senior-specific certifications or designations that imply the user has special certifications or training in advising or servicing senior citizens with the offer, sale or purchase of securities in such a way as to mislead that person.”
Soon after the rule was adopted, the Securities Division fined an investment adviser $500 for violating that rule, said D’Alessandro. •

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