If you have worked and saved for many years, you probably have fun thinking about how to enjoy your hard-earned resources when you retire. Maybe you dream of a vacation home, exotic travel destinations, or having more time for a favorite hobby.
But now try to imagine how you would feel if you suddenly lost your assets and had to give up those dreams — or at least postpone them. That disturbing scenario is much more than a scary thought. It happens to be a painful reality for many people who have made bad decisions in their personal wealth management and estate planning.
Some of these poor decisions in personal wealth management and estate planning have to do with trust, and many have had the misfortune of putting their trust in the wrong individual or company. There have been many who have turned high profile clients or estates into scams, such as Wall Street financier Bernie Madoff. In 2009, Madoff plead guilty to a series of federal felonies, which had turned his thriving wealth management business into a giant Ponzi scheme.
Madoff’s huge investment scandal collectively lost billions of dollars for his wealthy clients, including Steven Spielberg, Kevin Bacon, Larry King, and many others. He even wiped out a number of charitable organizations which had invested their funds with him.
Although Madoff is an extreme case – not just for the vast amounts of money he pirated, but also for the slick brazenness of his intention — crooked financial managers exist at every level.
In another well-publicized situation, rock star Billy Joel had allowed his young brother-in law to manage his money. Eventually, that decision resulted in the manager allegedly losing millions of Joel’s dollars due to risky investments, unauthorized loans, and bizarre business deals.
Music legend Willie Nelson also faced similar financial troubles. Several years ago, an IRS audit uncovered illegal tax shelters and shady deductions by his accountants, causing Nelson to owe the government $16.7 million in unpaid taxes and penalties.
Investment fraud is not just for celebrities
In many cases, the victims of such financial crimes simply made the mistake of trusting the wrong people and/or not paying close-enough attention to where their money was going. Wealthy individuals are strategic targets, because they naturally have more to invest and may not have much familiarity with how money management actually works.
Sadly, another group which is highly vulnerable to investment fraud is senior citizens. Many theories exist as to why elder adults often get tricked into making bad financial decisions. Some scammers rely on fear tactics, convincing impressionable seniors that they will inevitably run out of money and become a burden for their families. Another factor is the natural decline of processing acuity among older adults, which can make them easier to confuse.
Nefarious investment salespeople frequently take advantage of an elder person who may be lonely and in need of a friendly “advisor” – especially a charming one with enticing offers. In its recently released 2018 Elder Needs survey, Wells Fargo determined that although older Americans often are targeted for scams, a vast majority of respondents believe that they personally could not be fooled to fall for investment frauds or other financial forms of abuse.
Nonetheless, a report from AARP cites a study by MetLife which estimates that seniors lose at least $2.6 billion annually to what they define as financial exploitation. The report also states that 55 percent of financial abuse among individuals in the United States is committed by the victims’ family members, caregivers, and friends.
According to the North American Securities Administrators Association (NASAA), elder investment fraud accounts for nearly half of all complaints received by securities regulators, and it is believed those incidents are under-reported, since many people are too embarrassed to admit they fell for a scam.
Choose a safe and proven investment partner
The alternative to becoming a victim is easy: Just choose to work with qualified professionals who have excellent credentials and a long track record of success with satisfied clients.
Before you entrust your life savings and the future of your estate to any investment partners, check into their background. Ask for references. You can even contact your state’s securities regulator to see what certifications an investment firm has.
It also helps to get other members of your family involved. If a smooth-talking salesperson is reluctant to meet with your loved ones, that is a warning sign. Ask a lot of questions. A reputable elder care advisor will take the time to carefully walk you through every aspect of your estate planning and investment strategies.
The elder law attorneys at TuckerAllen can offer insightful guidance to help you understand alternatives and make the best decisions for you and your family.