I’ve written about financial fraud involving seniors before, and it remains a serious concern. Unfortunately, there’s not much we in the investment industry can do beyond warning our clients to be vigilant and working through issues when they arise. As with any sort of fraud, the best defense is an educated and skeptical investor.
Let me share a recent situation encountered by one of Vanguard’s client-service phone groups.
You see it all too often: A caretaker is arrested for stealing funds from a senior under his or her care. What you don’t see as frequently—though I believe it’s a great deal more prevalent—is family financial fraud, primarily targeting seniors. It generally takes the form of identity theft and account takeovers. It often involves close family members, in-laws, and friends, and it can leave seniors virtually destitute.
How does your ability to make financial decisions change over time?
One research study suggests that, across the population, financial skill follows a hump-shaped pattern. In our youth, we start with low levels of financial knowledge. Over time, our ability grows through experience. However, as we age, our cognitive faculties begin to decline. Over time, the decline in ability outpaces the growth in experience, and as a result our net ability falls. Hence the idea of a hump-shaped curve: from a low in youth, to a peak in middle age, to a slope downward in our older years.
