Elder Financial Abuse and Vulnerable Investor Claims

What Is Elder Financial Abuse?

Elder financial abuse can occur when someone uses:

• pressure;
• deception;
• trust;
• dependency;
• isolation; or
• financial authority

to take or control an older person’s money, investments, insurance, property or financial decisions.

It may involve:

• a family member;
• a friend;
• a caregiver;
• an attorney under a power of attorney;
• a financial advisor;
• an investment representative;
• an insurance agent;
• a professional; or
• another person in a position of trust.

What goes wrong with Vulnerable Investors

The most common abuses involving vulnerable investors are churning, stock option and other high risk strategies, and being sold private credit and private equity securities. Common elements are, often but not always, the generation of higher fees to the advisor or the use of the vulnerable investors money to support troubled investments which the advisor or their other clients are in.

Older age alone does not mean that a person is incapable or vulnerable.

An older person has the right to make decisions that others may disagree with.

The concern is whether the decision was freely made and understood, or whether another person used pressure, deception or authority for their own benefit.

Read more about vulnerable investors and life changes.

Warning Signs of Possible Financial Abuse

Warning signs may include:

• unexplained withdrawals or transfers;
• unusual gifts or loans;
• sudden changes to investments;
• high-risk investments that do not fit the person’s needs;
• investments in companies that are known to you, i.e. not blue chip;
• money moved to a joint or third-party account;
• new debts or credit cards;
• missing account statements;
• unpaid bills despite available money;
• a new person controlling communications;
• pressure to sign documents;
• questionable signatures;
• changes to beneficiaries;
• changes to a will or power of attorney;
• isolation from family or long-standing advisors;
• fear when finances are discussed;
• confusion about transactions; or
• a trusted person receiving an unexplained financial benefit.

These signs do not prove abuse.

They may justify a closer review.

Misuse of a Power of Attorney

A power of attorney can give another person significant control over someone’s finances.

Most attorneys act responsibly.

A concern may arise if the attorney:

• uses money for personal expenses;
• transfers assets to themselves;
• makes unexplained gifts;
• sells property without a clear reason;
• changes investments for personal benefit;
• refuses to provide information;
• keeps poor records;
• mixes the person’s money with their own;
• isolates the person from others; or
• acts against the person’s known wishes.

Unsuitable Advice to Older or Vulnerable Investors

Financial harm can also arise from professional advice.

An older or vulnerable investor may be placed into:

• high-risk investments;
• private or illiquid products;
• long-term investments;
• leveraged strategies;
• concentrated portfolios;
• complex insurance products;
• frequent trading strategies; or
• products generating significant commissions.

A concern may arise if an advisor ignored:

• the investor’s age;
• reliance on retirement income;
• need for capital preservation;
• declining health;
• cognitive changes;
• dependence on another person;
• need for access to money; or
• inability to recover from a major loss.

Financial Abuse by Family Members or Caregivers

Financial abuse often happens within a trusted relationship.

The person may depend on the person causing harm for:

• housing;
• transportation;
• healthcare;
• banking help;
• daily care; or
• companionship.

That dependence can make it difficult to speak openly.

The older person may:

• feel embarrassed;
• fear losing the relationship;
• worry about losing housing or support;
• believe the money will be repaid;
• not fully understand what happened; or
• defend the person despite financial harm.

Families should approach these situations carefully.

What Should Families Do?

Preserve information you can lawfully access.

Helpful records may include:

• bank statements;
• investment statements;
• insurance policies;
• beneficiary forms;
• powers of attorney;
• wills and estate documents;
• cheques and transfer records;
• emails and text messages;
• advisor correspondence;
• relevant medical or capacity records; and
• notes of concerning conversations.

Record:

• when the financial changes began;
• who became involved;
• which assets changed;
• who benefited;
• whether the person understood the transactions;
• whether pressure was used; and
• whether a bank, advisor or insurer was involved.

For investment-loss concerns, see investment-loss recovery options.

Can an Executor or Estate Trustee Investigate After Death?

Depending on the circumstances, yes.

An executor or estate trustee may discover:

• unusual withdrawals;
• high-risk investments;
• unauthorized trading;
• missing assets;
• beneficiary changes;
• questionable gifts;
• misuse of a power of attorney; or
• financial advice that reduced the value of the estate.

The death of the affected person does not necessarily prevent the financial activity from being reviewed.

Can a Financial Institution Be Responsible?

Possibly. While the investment dealer or life insurer is often responsible for the acts and failures of their advisors, there are exceptions.

A bank, investment dealer, advisor or insurer may have been involved in the transactions. This may be obvious, or may require special knowledge to uncover their role.

A review may consider whether the institution:

• ignored warning signs;
• failed to question unusual activity;
• relied on questionable instructions;
• failed to understand the client;
• allowed unsuitable investments;
• failed to supervise an advisor; or
• processed transactions without proper authority.

Frequently Asked Questions