Financial Scams Target Elders

As if things are not awful enough in the United States of Delusion, with a huge number of baby boomer Americans joining the over 65 crowd it is disheartening to learn that financial scammers are targeting elders. More than 7.3 million older Americans - one out of every five citizens over the age of 65 - already have been victimized by a financial swindle, according to a major 2010 Protection Investor Trust (IPT) survey.

The exploitation of older people is occurring because they are especially vulnerable to clever scams and frauds and because many of them have some wealth and investments. The survey found that almost half of those aged 65 or over (44 percent) got at least two out of four questions wrong about basic investment knowledge.

Warning signs of the impending increase in targeted financial scams of the elderly include: About one out of three older Americans (31 percent) admit they are vulnerable in one or more ways to potential financial victimization., and more than one out of three seniors (37 percent) say they are currently being pitched by "people (who) are calling me or mailing me asking for money, lotteries, and other schemes." Surprisingly, 71 percent of those over 65 handle finances themselves, 24 percent rely on relatives for at least some help and only 3 percent rely on non-family members, meaning that professional financial advisors are not being used very much. That is a big mistake in today's complicated world of finance and investments.

Compounding this problem is that people are living longer, well into their eighties and nineties and staying in their homes by themselves. Their adult children may not be aware of just how much they are being targeted by frauds. Nor are adult children aware that even when the health of their parents is pretty good, their mental capacity to avoid being financially victimized may be very poor. And healthcare providers are of little protection; only 2 percent of those aged 65 or older say that their healthcare provider has ever asked about "how you are handling money issues or problems."

Note that a 2008 Duke University study found that about 35 percent of the 25 million people over age 71 in the US either have mild cognitive impairment or Alzheimer's disease. This makes them especially vulnerable to financial exploitation, including investment fraud.

Personally, at age 71, I have become acutely aware of this situation. I recently received a surprising letter from an outfit called CMG Advisors LLC. It used a lot of frightening language to convince me to sell them the shares I owned in a real estate partnership for just $6 a share, well below the $10 per share I paid. There was no sound financial reason to sell these shares, because the partnership was, in fact, a good investment paying over 7 percent interest in dividends. Plus there would be a likely gain when the partnership sold its properties in the near future. But the letter made it sound as if there was considerable likelihood of loss of capital by holding on to the shares.

I did two things. I contacted my financial advisor immediately who had selected the investment for me. He quickly informed me that that the letter was not unusual, a type of legal fraud attempting to take advantage of gullible investors. In fact, such letters are sent when it becomes clear that a real estate partnership investment vehicle has signaled that it is pursuing going public or otherwise selling off its real estate holdings, events which normally produce additional financial rewards for share owners. But he acknowledged that elderly investors might act against their own interests after receiving such a cleverly worded letter.

The second thing I did was find the website of CMG Advisors LLC. There was not much on it. But the description of what the company did to make large profits revealed a huge contradiction. The business model was to identify quality, well managed real estate partnerships that were on track to sell out. Then hit share holders with a low priced offer. Then the company would be able to make a huge profit when the partnership sold out, an even bigger profit than share holders that had paid the normal, higher share price would make if they held on to their shares. So, on the one hand, the company was saying it was selecting very good investments while, on the other hand, sending frightening letters to scare investors like me into selling their shares at a very low price because the investment was not good.

This company has been in business for some ten years pursuing this victimization strategy successfully. I suspect that the vast majority of its victims are the elderly.

With the economy still in deep trouble and so many millions suffering from the Great Recession it is even more important to recognize that the elderly are being targeted by financial scams that government regulations are not effectively preventing. Not only must the elderly become far more vigilant, but relatives and friends need to pay far more attention to safeguarding the financial interests of those they love. This is a great website to pursue sources of information about scams and frauds.