Financial scams that target seniors are all too common—and they often end tragically. In one of the most recent examples, the Securities and Exchange Commission is charging a couple in Florida with using a charitable-gift-annuity scheme to cheat seniors out of $75 million.
The alleged perpetrators, a husband and wife team, persuaded older investors to exchange stocks, annuities, real estate and cash for a charitable-gift annuity that would supposedly make charitable payments for the remainder of the client’s life, according to the SEC. Seniors were led to believe they’d be making a difference by, for instance, helping to fight AIDS in Zambian orphans.
Fleecing their victims, the pair allegedly paid themselves more than $1.1 million in salary and commissions, and made hundreds of thousands of dollars worth of unauthorized payments to boot, the SEC says. The husband in the case, Richard K. Olive, is already facing criminal charges of mail fraud, wire fraud and money laundering in a previous charitable-gift annuity scheme.
It’s a sad fact of life that fraudsters have always preyed on the elderly. Now, brain researchers at UCLA are gaining a clearer understanding of exactly what it is that makes seniors so vulnerable. A recent study focused on an area of the brain known as the insular cortex. That region is supposed to register an emotional reaction of disgust when we’re approached by an untrustworthy, shifty-looking person. Using magnetic resonance imaging, the researchers found that, when people in their 20s are shown pictures of dubious-looking characters, their insular cortex started lighting up. In older people, though, such signals were absent: That part of the brain’s warning system was simply dormant.
The upshot of the study: To seniors, the bad guys may not appear to be bad guys. And when the “uh-oh” gut reaction abandons us, scammers can too often gain seniors’ trust. Unfortunately, criminals may be about to enter a bull market for scamming seniors. That’s because 70 million baby boomers have begun to retire, and more and more of them are personally handling their own retirement investing. Scammers are well aware of this, and they surely see a bumper crop of opportunity.
It’s up to all of us to try to protect parents and grandparents. One of the best ways to stay safe, of course, is to use the expertise of a professional. Seniors—and anyone else for that matter, should always have a qualified advisor, attorney, CPA or other professional review any kind of financial pitch they receive. Finally, if you are a client, and you think your parents may be falling for a fishy deal—let your own advisor, attorney or CPA have a look. That simple step could save your parents or other seniors you care about untold grief.