How to Build a Firewall Against Financial Scams & Abuse: 5 Action Steps

Bob Carlson


Everyone knows it’s older Americans who are the most likely targets and victims of financial abuse and scams.

But it’s not just older people who fall victim. The crooks look for vulnerable people. By the time you’re vulnerable, it’s often too late to create real protection.

Take action now, so that in the future you (along with your spouse and loved ones) will be guarded from these fast-growing crimes.

Here are the steps you can take to protect yourself:

Inventory. Compile an inventory of all your assets, accounts, financial contracts and policies.

There are several benefits to this. First, it will be much easier for you to manage your finances when you have everything organized. Second, you won’t lose track of some assets.

More importantly, there will come a time when someone else will have to take over the management or liquidation of these items. It might be the executor of your estate, your spouse, or the holder of your financial power of attorney.

You might even decide in a few years that you need help, or a co-manager, for your affairs.

Having a complete, up-to-date inventory of your resources makes the change easier and more effective.

Simplify. I’ve always been a big believer in simplifying your financial affairs.

Years ago, I learned that most people have too many accounts at different firms, and too many mutual funds that largely duplicate each other.

In general, there’s too much to keep track of, aggregate, and organize. The results are procrastination and confusion.

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It’s better to have as many of your assets as possible at one or two firms. You’re unlikely to lose track of things, and are more likely to make needed changes when there’s only one or two firms to deal with.

Anyone who later helps you manage the affairs, or takes them over, will have an easier time making decisions.

Another benefit of an inventory and simplification is, if it becomes necessary, it will be easier for authorities to determine and prove if you’ve been scammed or abused.

Identify trusted contacts. We all need one or more persons we can trust who know enough about us and our affairs that they can help with decisions.

It might be a spouse, relative, friend, or a professional advisor. You might want a financial expert. All you need are one or more people with intelligence, experience and common sense who will help you consider all the angles.

A more important role is for that person to be the trusted contact when financial firms have concerns.

In the last year or so, financial firms determined they should have a role in identifying potential fraud and abuse of their clients. They also should be alert for signs that a client is suffering from diminished mental capacity.

Some firms ask clients to identify a trusted contact. Financial regulators are in the process of issuing rules requiring financial firms to make the best efforts in obtaining such contacts.

A trusted contact is someone your financial firms can reach out to if there are signs there might be fraud or abuse. The firms will be on the lookout for unusual transactions, or signs that you have new difficulty understanding matters.

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A pending rule will allow firms to suspend disbursements from an account when they suspect abuse or fraud.

Select one or more agents. Your estate plan should include a financial power of attorney (POA). The POA names one or more people as agents who will manage your financial affairs when you aren’t able to.

Be sure you have a financial POA and give careful thought to the agent or agents. You need people who are both trustworthy and sophisticated enough to handle your affairs well.

Some advisors recommend selecting more than one agent primarily to make fraud and abuse more difficult, requiring collusion between the agents for it to happen.

Be deliberate. Don’t make financial decisions in a hurry.

Cognitive ability generally declines after age 35 or so, but it is more than offset by accumulated knowledge and wisdom. Don’t let anyone rush you into a decision, and be suspicious of anyone who tries to force a fast decision.

Make financial decisions after thorough evaluation and deliberation. Seek advice and help from others. You should have that friend, relative, or advisor who can listen to your reasons for considering an action, be able to ask questions, and make observations.

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