Older investors have heightened vulnerability to investment fraud and other kinds of financial exploitation during social isolation, which increases the chances of cognitive decline, warns a new investor bulletin from the U.S. Securities and Exchange Commission (SEC) through its Office of Investor Education and Advocacy in conjunction with other partners. It has been a difficult year for many of our seniors given the public health emergency and the pressure to stay home because of their vulnerability to more serious symptoms. Even those who were active before the quarantine have largely had to isolate themselves under these conditions.
Isolation and vulnerability
Of course, if isolation is associated with cognitive decline such as that associated with Alzheimer’s disease or other dementias, or even the beginning of memory loss, understanding a proposed investment and recognizing signs of fraud, unreasonable pressure or undue influence become more difficult for a senior investor.
According to the Feb. 9, 2021, investor bulletin, other factors unique to the situation that open them up to exploitation may include:
- Seniors who are divorced or widowed have no one with which to analyze and discuss a potential investment.
- Older investors who live alone may use the Internet without an understanding of how scammers may present themselves or how to do online research on the proposal or on the person claiming to be an investment advisor.
- Lonely elders may seek out online companionship, but dishonest people may hold themselves out as potential friends or romantic partners while intent on financial exploitation once they have gained trust.
- Senior investors may have had less financial education than their younger counterparts.
- It is not only strangers that prey on older investors. Relatives, friends, caregivers, professionals and neighbors may first approach an isolated elder offering to help make life easier or to visit, but their actual goal may be to get their hands on the elder’s money and asset
Older investors should increase their own awareness and sense of caution. Loved ones, caregivers and involved professionals should discuss investment fraud and scams with these elders and monitor for signs of problematic financial developments.