Penn Memory Center, Federal Reserve challenge financial leaders to take steps to protect wealth of older adults

 
Jason Karlawish, Penn Memory Center co-director, answers a question during the Conference on Aging, Cognition, and Financial Health at the Federal Reserve Bank of Philadelphia in November 2017. (Credit: Terrence Casey/Penn Memory Center)

Jason Karlawish, Penn Memory Center co-director, answers a question during the Conference on Aging, Cognition, and Financial Health at the Federal Reserve Bank of Philadelphia in November 2017. (Credit: Terrence Casey/Penn Memory Center)

 

By Joyce Lee

The Penn Memory Center and the Federal Reserve Bank of Philadelphia jointly challenged leaders of the financial sector to protect the wealth of older adults.

Bringing together representatives from major banks, as well as key stakeholders from the legal and medical fields, the Conference on Aging, Cognition, and Financial Health focused on improving and safeguarding the financial health and wellbeing of older adults, especially those with cognitive difficulties like mild cognitive impairment and dementia.

The Baby Boomers make up the largest generation in history moving into retirement, and also a generation living longer than any other before them, said Patrick Harker, President of the Philadelphia Fed, in his opening remarks.

Elder financial abuse and exploitation “is not a problem that stands in isolation,” Harker said. “It is woven into other segments of the economy.”

In the wake of increasing reports on financial fraud, the financial health of older adults has become an issue of national attention. Cognitive problems that arise in the course of aging can make one more vulnerable to financial abuse and exploitation, said PMC Co-Director Dr. Jason Karlawish.

The decline of fluid intelligence, the ability to learn new things, is one characteristic of aging, Dr. Karlawish said. Both this “cognitive aging” and neurodegenerative diseases like Alzheimer’s disease can lead to problems of “higher cortical function,” which can make tasks of daily living such as managing money and making sound financial decisions more difficult.

Renee Packel, a victim of financial mismanagement, talked about how the poor financial decisions of her husband, who was later diagnosed with Alzheimer’s disease, led to the disappearance of all of their savings. “We had [to hire] a forensic accountant, because there was no way to know what happened to the money,” she said. “The accountant couldn’t give us an explanation either.”

 
Renee Packel, center, told her story at the Conference on Aging, Cognition, and Financial Health at the Federal Reserve Bank of Philadelphia in November 2017. (Credit: Terrence Casey/Penn Memory Center)

Renee Packel, center, told her story at the Conference on Aging, Cognition, and Financial Health at the Federal Reserve Bank of Philadelphia in November 2017. (Credit: Terrence Casey/Penn Memory Center)

 

Packel had to sell the couple’s house and get a job, which she hadn’t held since before her first child was born. “It was a really horrendous time,” she said. “I was never so frightened.”

It was a really horrendous time. I was never so frightened.”
— Renee Packel, victim of financial mismanagement

Packel’s challenges are not rare. Initiatives led by the Department of Justice and the Administration for Community Living (ACL) are now trying to track the prevalence of financial abuse and exploitation of older adults. The earliest estimates of financial exploitation cases released by the ACL puts the number at more than 42,000 cases in 2016, though these were only the ones tracked and reported by Adult Protective Services in each state.

In a video shown at the conference, Philip Marshall, grandson of celebrated philanthropist Brooke Astor, talked about bringing his father to court over the financial abuse of his grandmother in a high-profile court case covered extensively by the media. Marshall said if there had been a means of detection, the financial abuse that befell his grandmother “could have been arrested early on.”

With advances in regulations, there are now ways for financial institutions to take action. A new Financial Industry Regulatory Authority (FINRA) guideline called Rule 4512, which goes into effect February 2018, is now making it possible for clients to put a “trusted contact” on their financial transactions. And if a financial institution suspects fraud, a Suspicious Activity Report (SAR) can be submitted to the Financial Crimes Enforcement Network (FinCEN) for the case to be investigated by law enforcement.

There are also internal ways for financial institutions to prevent financial fraud, such as educating older adults in the community on financial fraud, and training tellers and call center staff to recognize signs of financial abuse.

The older adult population is “the client base that’s most impacted by these financial scams and by financial abuse, and really, as bankers, it’s our obligation to be out there using what we’ve learned in our practice to give back to others,” said Laurel Sykes, of Montecito Bank & Trust.

Larry Santucci, senior industry specialist at the Philadelphia Fed, called for increased collaboration between financial institutions to prevent elder financial abuse and exploitation, drawing on insights from his recent paper that looked at how data-sharing between financial institutions can reduce financial losses for older adults.

Being able to stop or prevent fraud or financial exploitation in one person’s account is good, but it’s not sufficient.”
— Larry Santucci, senior industry specialist at the Philadelphia Fed

“The crime just doesn’t happen at one institution – it happens across accounts and across institutions,” Santucci said. “Being able to stop or prevent fraud or financial exploitation in one person’s account is good but it’s not sufficient. And there’s still a chance that – if it’s not that time and that event – a subsequent event will occur to that person in one of their other accounts.”

A key idea going forward from the conference is to encourage banks to give consumers the option to have their information shared securely across financial institutions, to ultimately protect the financial health and wealth of older adults.

The Conference on Aging, Cognition, and Financial Health: Building a Robust System for Older Americans was held at the Philadelphia Fedon November 28 and 29 and featured panels on financial needs of aging populations, ways banks can address those needs, current efforts to improve methods of tracking financial fraud, and importance of data-sharing to prevent financial abuse and exploitation.

More about the results of the conference will be released in coming weeks. The conference was also covered by the Philadelphia Inquirer, the Financial Advisor Magazine, and Barron’s.

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