By Cyril Tuohy
Elder fraud, which costs senior citizens billions of dollars every year, needs to be put “back high” on the agenda as the nation experiences a population aging boom over the next 20 years, a member of the Securities and Exchange Commission (SEC) said.
“Investigations of frauds committed against seniors need to remain a high priority for our investor protection missions,” Commissioner Michael S. Piwowar said in prepared remarks to the Securities Enforcement Forum 2014.
“As the Division of Enforcement continues to implement the many important and needed post-[Bernie] Madoff and post-financial crisis improvements, attention to these types of violations should not be overlooked,” Piwowar said.
The elderly make particularly vulnerable targets for scammers. Older Americans are often more gullible in response to sales pitches. They will sometimes sign on the dotted line even if they don’t have a complete grasp of what they are investing in.
And, the older the person, the less time they have to recoup losses sustained from a market downturn or a fraudulent sale.
Older Americans have accumulated trillions of dollars in investment and retirement wealth. With the percentage of Americans 65 years or older making up a larger share of the nation’s population, thieves will find this segment an irresistible target.
In 2010, Americans 65 years of age or older made up 13 percent of the total U.S. population of about 308 million.
By 2020, people 65 and older are projected to make up 16.8 percent of the population, and 20.3 percent by 2030, Piwowar said. In 2030, the United States will have a population of 363 million, according to ProximityOne, which develops demographic projections.
The commissioner said fraud committed by an individual broker or advisor is more likely to cause investors to lose all of their investments than fraud by a large company, which will cause individual investors to lose only some of their assets because they are held in a diversified portfolio.
In hearings earlier this year, Senate lawmakers explored ways to help seniors identify scams and fraud.
Federal Trade Commission data show an estimated 25.6 million Americans — or 10.8 percent of the U.S. adult population — fell victim to some kind of fraud in 2011. Weight-loss products, billing services, credit repair, debt relief, credit card insurance and mortgage relief were in the top 10 categories.
While general scams are almost commonplace, according to those figures, the number of individual financial advisors penalized for wrongdoing was less widespread, data from the Financial Industry Regulatory Authority (FINRA) show. Last year, 429 individuals were barred from working in the financial industry and another 670 were suspended, FINRA said.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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