Ethics Center: Business Ethics

Advisor Alert: How Good IS Your Senior Abuse Prevention?

Have you and/or your firm optimized your business practices in order to prevent your senior clients from falling victim to financial abuse or fraud?

If you’re not sure how to answer, then consider reading a new study from the North American Securities Administrators Association (NASAA), released June 15, 2017 in recognition of World Elder Abuse Awareness Day. Based on responses from 60 securities broker-dealers, the study found that virtually all the broker-dealers had internal processes to identify and internally report cases of suspected diminished capacity or senior financial abuse. In almost all cases, they also trained their staffs on how to implement these policies.

In total, the study identified 2,300 cases of suspected senior-related fraud or exploitation reported to authorities in 2015. The facts of each case varied substantially, including clients who . . .

  • Believed someone needed assistance to collect a $7 million settlement delayed due to identity theft.

  • Thought a large inheritance was coming from China due to the death of a business partner, but instead received broker-dealer guidance on advance-fee scams.

  • Tried to send $200,000 in a $4.5 million sweepstakes scam, with the broker-dealer intervening with the client’s son.

  • Wanted to send a wire transfer to a European woman needing money to come to the United States.

On a less positive note, the study also found that . . .

  • More than half of the broker-dealers (54 percent) lacked a formal policy defining senior customers.
  • Only 34 percent had a dedicated team responsible for handling senior-related issues, although 90 percent had either a dedicated team or internal processes in place.
  • Only 30 percent had created senior-specific policies and procedures.
  • External reporting of suspected senior fraud or abuse occurred in at least 62 percent of internally escalated cases, but only rarely were cases reported to local law enforcement (4 percent) or state securities regulators (1 percent).

Although the general tenor of the report was positive, NASAA implied the industry should do more to keep seniors safe. The National Ethics Association believes a good starting point is asking yourself the same questions covered in the NASAA survey:

  • Does your firm have a formal policy defining senor customers and, if so, what age defines senior status?
  • Does the firm have a department, committee, task force, or other group or person responsible for identifying and addressing senior-related issues?
  • Does the firm have a policy to collect information about trusted or emergency contacts?
  • Are additional documents required when opening or updating accounts for senior customers?
  • How frequently does the firm review, update, and document senior investment objectives?
  • What is the process to report concerns regarding potential diminished capacity and/or elder financial abuse?

For more information, contact your compliance officer and/or visit NASAA’s senior-focused website,

For information on affordable E&O insurance for low-risk insurance agents, investment advisors, and real estate broker/owners, please visit For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center.