A new spat of regulations is another reason advisors are keeping tabs on their clients’ mental state.
Two new FINRA rules aimed at protecting older investors went into effect last year.
One of them requires that financial advisors ask their clients for a trusted contact in case they exhibit red flags, such as wanting to invest their lifetime savings in bitcoin. The other permits financial advisors to put a temporary hold on their clients’ bank accounts if they suspect exploitation is occurring.
To be sure, some elderly clients may find their advisors have overreached. Last year, a woman sued Fidelity, after the company froze her assets when it became concerned about her mental state. As a result, the woman claimed, she was unable to pay her electric bill, visit the dentist or take her dogs to the veterinarian.
Still, Wrona said advisors often hear from their older clients with suspicious requests and are unsure of how to respond.
“A [client] will say, ‘I won the lottery, but I need to pay the taxes upfront before I can claim the award,’” Wrona said. If the client demands the money even after the advisor has explained that it’s a scam, he or she can then temporarily pause their assets and investigate further.
More than a dozen states have also passed laws that allow financial firms to pause disbursals when financial exploitation is suspected.
Congress passed a law last year called The Senior Safe Act, which encourages advisors to get trained in spotting fraud or abuse and report any such instances to law enforcement.
“Getting that training is going to stop a lot of financial exploitation,” said Cristina Martin Firvida, vice president for financial security and consumer affairs at AARP.
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