Tips For Spotting Financial Abuse With Your Clients

By Amanda Cassar

One of the most unfortunate side effects of the COVID-19 pandemic has been a surge in domestic violence.

Some police departments have reported increases in domestic violence-related 911 calls, while others have chillingly reported a drop in such calls because victims no longer feel as safe to report.

Financial abuse occurs in 99% of all abusive relationships, making this one of the most important types of abuse to watch for. Advisors have a special ability – and therefore a special responsibility – to detect and combat financial abuse.

By educating themselves on the issue and developing key plans and relationships, advisors can prepare themselves for a day in which they need to help remove a client from an abusive situation.

Recognizing The Risks

According to a study by financial wellness website CentSai, nearly 70% of Millennial women and 50% of Millennial men have suffered financial abuse from a partner at least once in their lives. These figures, though shocking, relay a simple truth: abuse is not committed only by a select few monsters in society.

It is frequently suffered, commonly perpetrated and can happen to anyone. Certain vulnerable groups, like the elderly, face higher chances of victimization, but all clients can end up in financially abusive situations.

Financial abuse typically starts small and grows over time. What begins as lying about money or discouraging certain career moves can metastasize into one partner restricting the other’s purchases, employment opportunities, and even basic living resources from food to menstrual products.

In severe cases, the abuser may run up debt in their victim’s name, make fraudulent withdrawals from retirement accounts, or bar their partner from having investments at all. Advisors must watch for any and all of these factors as possible red flags for abuse happening to a client – by noting “small” warning signs, advisors can better prepare for the possibility of a larger problem.

Elderly victims of financial abuse can face all the above and more. As victims age, they become more vulnerable to abuses of power of attorney, verbal or emotional abuse linked to “inheritance impatience” or even “granny dumping,” the act of a family leaving an elderly relative at a hospital or nursing home and refusing to provide for their care going forward.

Everyone can find themselves in abusive situations, but some factors can make it more likely for someone to encounter financial abuse. These factors include living alone, disability, low financial knowledge, speaking English as a second language and, sometimes, racial or ethnic minority status.

While advisors should never assume any of these traits guarantees financial abuse, it may be particularly important to watch out for abuse befalling clients in these demographic groups.

Case Handling

Financial abuse encompasses a wide range of potential behaviors, many of which can fall into a grey area where there is no easy way to determine if a behavior is definitively abusive. Is a client’s spouse suffering financial abuse, or do they genuinely feel comfortable with their partner handling all finances?

Advisors cannot always tell, but they can start taking notes when they encounter these gray-zone situations. Over time, a collection of notes can provide a clearer picture than anyone can glean in a single, one-hour meeting.

Advisors who think they have observed financial abuse have several options. The first, and perhaps foremost, is to ask for help. By alerting members of their team, advisors can keep more eyes on a situation and help ensure any victims can quickly get needed help.

Broker-dealers, local and national abuse hotlines, domestic violence shelters and lawyers specializing in domestic violence and estate planning can also provide crucial guidance.

Advisors should keep lists of these resources and build relationships with key stakeholders. In immediate emergency situations, police can also be notified.

Contacting clients in potentially abusive situations should be handled with care. Individuals are the best judges of their own situation, and they may not feel abused or may not want to leave an abusive setting. Advisors can offer themselves as resources for clients who may not be ready to act.

Teaching clients how to open private bank accounts or establish protective trusts may give them tools they need one day. Advisors can also be ready to contact investment or retirement account providers and ask for accounts to be suspended if they come across fraudulent transactions.

If an advisor decides to confront abusers, they must remember that their safety and the safety of abuse victims comes first. Acting in a client’s best interest does not always mean confronting their abuser. Often, it means doing what’s possible to remove someone from an abusive situation without direct confrontation.

Like all other forms of abuse, financial abuse is hard to combat and can be difficult to detect. However, with the right resources and planning, financial advisors can be ready to help clients in need, should the day ever come.

About the Author
Amanda Cassar holds a Master’s degree in financial planning, and is an eight-year member of MDRT. She has been in financial services since 1991 and is the sole Director of Wealth Planning Partners in Robina, Queensland, Australia. She is the author of Financial Secrets Revealed.