Financial abuse of elderly people is increasing as more seniors are being lured into investments that are unsuitable (inappropriate) or outright frauds.
According to recent articles in InvestmentNews and Bloomberg, one out of every five Americans older than 65 has been the victim of a financial scam. This means that more than 7.3 million seniors have been taken advantage of financially. New York-based insurer MetLife estimates the total costs of elder fraud comes to more than $2.6 billion a year. One of the reasons for the trend is the significant number of elderly individuals who have significant wealth and who may be suffering from some degree if cognitive difficulties.
The articles point to a practice of abusing senior citizens that ” involves taking out a reverse mortgage and then locking up the proceeds in a multi-year annuity, even though a ban has been in place since 2008 on cross-selling the mortgages with other financial products,” said Kent Smetters, a professor of insurance and risk management at the University of Pennsylvania’s Wharton School in Philadelphia. Reverse mortgages let people age 62 and older get cash out of their homes and are repaid when the borrower dies or moves.” The article goes on to state that other “inappropriate investments aimed at seniors are pools of life insurance policies, similar to the bundles of home mortgages that helped fuel the financial crisis”.
The articles also confirm that principal protected notes are another type of investment aimed at seniors. These notes combine bonds with derivatives to offer investors bets on stocks and commodities. As reported in Investment News, according to John Gannon of the Financial Industry Regulatory Authority in Washington, seniors fall for these investments because the name makes them sound as if they’re risk-free; in fact the principal isn’t always protected, as holders of notes backed by Lehman Brothers Holdings Inc. learned when the firm collapsed in September 2008.
Mr. Gannon was quoted, “Financial professionals, both legitimate and illegitimate, know there are assets seniors have that they can get their hands on,” Gannon said. “They’ve figured out ways to get to all of them.”
According to Pratt H. Davis, an attorney with Page Perry, “our experience and the data available indicate there is a staggering amount of financial abuse directed at the elderly. Seniors and their families need to be on the lookout for financial scams and unsuitable investments.”
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing senior citzens that have been victims of fraud. For further information, please contact us.