Six Practical Steps to Better Protect Senior Clients

The statistics on senior scams continue to rise and so is the regulatory scrutiny of advisers serving elderly investors. In addition, Artificial Intelligence (AI) scams such as “Deepfakes” (which use AI to realistically mimic a person’s appearance, voice, or actions) are becoming increasingly sophisticated and common.

Regulators expect advisers to take the necessary measures, and implement stringent, protective protocols to keep their most vulnerable clientele safe from financial scams.

Most senior scams are successful because they exploit three core factors:

1. Authority and Trust Manipulation: Most seniors value institutional credibility and are more likely than younger counterparts to trust “authority.”
2. Urgency and Fear: Scammers engineer crises to convince victims that immediate action is necessary, removing time needed for assessing the legitimacy of the situation before acting.
3. Isolation and Emotional Grooming: Scammers take advantage of seniors who may be isolated or experience loneliness, usually curating fake chat groups, or romantic attachments to gain access to funds.

Six Practical Steps to Better Protect Senior Clients

In recent years, FINRA has provided various guidance for firms to generally consider for implementing internal controls to help protect seniors and other vulnerable adults.  These best practices can help firms to maintain compliance and strong protections to better protect seniors.

1. Implement Fraud Detection Controls to monitor for:

• Sudden liquidation of long-term positions
• Requests tied to urgency or secrecy
• Wire instructions following unusual phone/email contact
• New crypto or “AI trading platform” investments

2. Establish Clear Escalation & Reporting Procedures and have written policies for:

• When to delay disbursements
• When to notify a trusted contact
• When to report to Adult Protective Services
• When to file SARs (if applicable through custodial partners)

3. Train Advisors to Recognize Behavioral Red Flags such as:

• Stress
• Confusion
• Fearfulness

4. Implement full use of Trusted Contact & Authorization Protocols (TCP) and make sure to:

• Obtain and document at least one trusted contact
• Reconfirm contact details annually
• Clearly define escalation triggers for contacting the TCP

5. Educate Clients on Scams including AI scams and trends in the market such as:

• Voice cloning scams (“grandparent emergency” fraud)
• Deepfake video impersonations
• Fake AI investment dashboards
• Crypto “recovery” scams

6. Create a Culture of Proactive Protection by:

• Designating a senior investor protection officer
• Including exploitation metrics in compliance testing
• Conducting mock scam simulations internally
• Encouraging advisors to slow down urgent transactions

Advisers can also encourage ongoing conversations between family members, and advisers to discuss scam response plans, and implement a “call me first” policy before sending large funds of money.

Jacko Law Group is committed to helping advisers protect their vulnerable clients while meeting their regulatory requirements. For more information, including development of senior investor protections and regulatory requirements, please contact us at 619.298.2880 or email [email protected].