Is Something Amiss? Protecting Your Senior Clients

Keywords: managing risk, regulatory focus, fiduciary responsibility, documentation

When you know your senior clients as well as you do, you’re accustomed to their risk thresholds, financial habits, and general rhythms of activity. So you may be taken aback, for instance, if a client asks for several distributions of increasing amounts over a short period of time. Of course, they could be legitimate requests—or something could be greatly amiss.

When a new request seems out of character or suspicious, how do you go about protecting your senior clients and ensuring that they are not victims of elder abuse? Trust your gut and ask questions that will help you better understand the request and identify potential red flags.

4 Questions You Should Be Asking

Approach any question you ask with care and sensitivity, as each client and situation are unique. It’s beneficial to ask open-ended questions first. Then, if the client has difficulty answering, you can focus your inquiry as the conversation progresses. Here are four questions that can help you better understand the client’s request.

What do you plan to do with the money? To avoid seeming confrontational, you can say that it’s helpful to understand the client’s expenses to effectively manage their assets. Under anti-money laundering (AML) regulations, you need to understand the nature and purpose of transactions in client accounts. A client isn’t required to provide a reason for a transaction, but refusing to explain why they’re withdrawing funds is a red flag.

If a client says they need to pay bills, continue probing with additional questions. For instance, ask why extra funds are needed to pay bills this month as opposed to other months. To gain further insight, you can also ask about the client’s monthly income and expenses. The more information you gain, the more red flags you could uncover.

How will you pay your expenses once the funds are in your bank account? When you’re directed to send funds to a client’s bank account, ask where the money is going next. Answers involving mailing cash, bitcoin, gift cards, prepaid cards, or payments to an unknown third party are red flags.

Pay attention to the client’s circumstances. Sudden requests for funds may be more suspicious for clients who are recently widowed, divorced, or otherwise isolated or those who mention a new friend in their life. The same goes for clients with a personality susceptible to risky ventures, such as “get-rich-quick” investments, or those who have previously been the victim of a scam.

What are your plans for eventually replacing the funds? If your client says the funds will be returned soon, ask how they plan to do that. Where will they get those funds? Fraudsters perpetrating romance and lottery scams frequently assure victims that their money will be returned quickly. You could also discuss how a transaction will affect the client’s financial situation.

Why is there a sense of urgency around this request? Fraudsters often tell victims they must act right away to receive a benefit. Some victims are told they’ll be arrested if they do not pay immediately. So, if a client is particularly anxious to get money, ask why. Frame the question as being helpful. For instance, say you would like to prevent a situation in which funds are urgently needed.

Protecting Your Senior Clients

To safeguard your clients’ best interests, you will want to report your suspicions about unusually large or frequent withdrawals to your compliance or legal resources. Such conversations can give you a clearer understanding of the situation and prevent loss of money to a fraudster.

While every situation is unique, sometimes it’s necessary to place a temporary hold on the requested distribution under FINRA Rule 2165. The client’s trusted contact or the person holding a power of attorney may need to be contacted, or the matter may need to be reported to a local social services agency.

This material is for educational purposes only and is not intended to provide specific advice.

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