Protecting Mom from financial scams

A reader asks our expert how to protect his 69-year-old widowed mother from financial fraudsters.

By Walter Updegrave, Money Magazine senior editor

NEW YORK (Money) -- Question: My recently widowed mom is almost 70 and living off a pension, plus income she gets from working. She's very independent, but I'm worried that she could easily fall prey to people who go after aged pensioners. What is the best way to make sure she is protected from these crooks? - Salve, Seattle, Washington

Answer: It's unfortunate, but you're absolutely right to be concerned. The Securities and Exchange Commission estimates that some five million senior citizens are the targets of financial abuse each year. The SEC considers this such a major problem that last summer it organized a Seniors Summit to raise awareness of this issue.

What makes elderly citizens such as your mom such inviting targets is, quite simply, that many of them have money.

And the lure of easy money brings out all sorts of unsavory characters. There are outright con men looking to gain seniors' trust so they can get access to their accounts. There are flim-flam artists running telemarketing scams that peddle phony vacation packages or solicit money for dubious charities. And there are "legitimate" investment advisers who run "free" retirement planning seminars where seniors are steered into high-fee investments. (For more on one particularly egregious investment that's often pushed on retirees - equity index annuities - click here.

So what can you do to prevent elderly relatives or friends from falling prey to such schemes?

Well, you can start by alerting older relatives and friends about the types of schemes out there that specifically target seniors. One way to do that is to recommend mom or dad check out the North American Securities Administrator's Senior Investment Resource Center, which includes a rundown on some of the most common deceptions making the rounds these days as well as a Fraud Awareness Quiz.

If your elderly relatives don't have access to a computer - or you doubt they'll actually follow through and go to the site - you can always print out the materials yourself and use them to start a conversation.

Naturally, this is a situation you want to handle with as much grace and tact as possible. If your relationship with a parent is such that you think they would be willing to actually sit down and go over their finances with you, fine. Do that on a periodic basis. But in many cases such a direct approach may backfire, making an elderly person less likely to confide.

The last thing you want to do is give the impression that you think your mother or father are incompetent or, worse yet, stupid. (Just as an aside, you should know that even highly intelligent and savvy investors can fall for investment scams.)

One way to broach this topic may be to show mom or dad an article about elderly financial fraud, such as the feature story my colleague Donna Rosato wrote last year in Money Magazine. Or if you have an acquaintance whose parents were taken in by a scheme, you could use that example as a springboard into a broader discussion about financial swindles and how to avoid being fleeced.

And while you certainly don't want to poke too obtrusively into an elderly friend's or loved one's personal affairs, try to maintain enough contact so that you at least have a sense of whether anything financially significant is afoot.

Have your parents talked about new investments or meeting advisers who are going to get them a better return or a guaranteed income? Does your mother or father seem to defer unduly to the judgment or advice of a particular person you're not familiar with? Have your parents' spending habits changed dramatically, or have they complained about being short of money lately? All these may be signs of trouble.

If you discover something's amiss, don't launch into a lecture or stern reprimand. People who've been swindled already feel bad enough; you don't want to make them feel worse or, for that matter, feel embarrassed to confide in you in the future.

Instead, help the victim report the incident to the appropriate regulator or law enforcement agency - your state securities regulator is probably the best place to start - and then try to offer whatever assistance and support you can, whether it's financial, emotional or both.

Ultimately, though, the best thing you can do is stay in touch. Not only will that make it more likely that you might notice something is amiss, it may also increase the chance that an elderly relative or friend might reach out to you for advice before their money is gone.


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