When individuals entrust their life savings to financial advisors, they have every right to expect that these professionals will act in their best interests. Nevertheless, elderly fraud remains a serious concern across the United States, with brokers and financial advisors sometimes taking advantage of vulnerable seniors. At Erez Law, PLLC, we represent victims of elder fraud abuse and help them recover their losses through FINRA arbitration.
If you or a loved one has experienced financial exploitation through unsuitable investments, unauthorized trading, or other forms of misconduct, contact us today for a free consultation to discuss your case.
What Is Elder Investment Fraud?
Elder abuse fraud occurs when brokers or financial advisors take advantage of older Americans via practices that are deliberately deceptive or otherwise inappropriate. Their actions can lead to devastating financial losses for vulnerable seniors.
Elder financial fraud takes many forms, from recommending overly risky investments to churning accounts to generate excessive commissions. Seniors are particularly vulnerable to financial exploitation practices due to factors like social isolation, cognitive decline, and reliance on their advisors for financial guidance.
Common Elder Scams
Elderly investment scams often target seniors through sophisticated methods that can drain retirement savings and devastate financial security. Financial advisors may engage in practices that put seniors’ investments at risk. Here are some common scams and problematic practices that particularly affect older investors:
Unsuitable Annuities
Annuities are legitimate investment products that can serve a practical purpose in some portfolios. However, some financial advisors recommend complex annuity products with features that make them unsuitable for older adults. For example, a broker might encourage an 80-year-old retiree to purchase a variable annuity with a 15-year surrender period, meaning the investor would face substantial penalties for withdrawing money before age 95. These products often carry high fees and commissions that benefit the advisor while potentially harming the senior investor.
Private Placements
Private placements typically entail real estate or business ventures that promise high returns but come with considerable risks. For instance, a broker might talk a retired couple into investing most of their savings in a real estate development project, claiming it will provide steady returns. However, these investments often prove illiquid, meaning investors cannot easily access their money when needed for medical expenses or other emergencies.
Overconcentration
Proper diversification represents a fundamental principle of sound investing. However, some advisors may concentrate too much of a senior’s portfolio in a single investment, sector, or type of security. Consider a situation where an advisor places 70 percent of a retiree’s portfolio in energy stocks. While the advisor might believe in the sector’s potential, this level of concentration leaves the senior dangerously exposed to industry-specific risks that could wipe out years of savings if the sector experiences a downturn.
Excessive Trading (Churning)
Some brokers engage in excessive trading (also known as churning) to generate commissions for themselves rather than to benefit their clients. This practice can particularly harm older people who depend on their investment income. For example, a broker might repeatedly buy and sell stable, long-term investments in a retiree’s account, creating unnecessary transaction costs that steadily erode the value of the investor’s financial accounts while generating commission income for the broker.
Financial Exploitation
Sometimes, outside scammers defraud elderly individuals, causing them to withdraw funds from their brokerage accounts in a suspicious way. There are often red flags associated with this type of elder abuse, including sudden changes in banking habits, unauthorized transactions, or adding names to accounts. Brokers have an obligation to identify and report suspicious signs of abuse. Failing to do so could result in liability.
Signs an Investment Might Be a Scam
Understanding the common warning signs of elder abuse and investment fraud can help protect seniors from financial harm. Watch for these red flags:
- High-pressure sales tactics – A broker or advisor insists you must act immediately or claims an investment opportunity will disappear soon. Legitimate investments rarely require rush decisions. Pressure to act quickly often masks underlying problems.
- Guarantees of high returns – Any promise of “guaranteed” profits or claims of “little or no-risk” investments should raise immediate concerns. Every investment carries some level of risk, and those promising unusually high returns typically involve greater risk or may be misleading.
- Overly complicated investment strategies – Question any investment recommendations that the advisor can’t explain clearly or involve intricate trading patterns. If you can’t understand how an investment makes money, this might indicate the advisor is trying to obscure important details.
- Unsuitable recommendations – Look out for investment suggestions that don’t match your stated goals, risk tolerance, or financial situation (e.g., recommending aggressive growth stocks to someone who needs steady retirement income).
- Unusual account activity – This includes frequent trading, unexpected withdrawals, or sudden changes in investment positions that you didn’t authorize. Regular review of account statements can help catch these issues.
- Isolation attempts – Be wary of any advisor who discourages you from discussing investments with family members or other professionals or who insists on meeting alone. This behavior often indicates an attempt to prevent outside scrutiny of questionable practices.
If you notice signs of suspected senior financial exploitation, documenting these concerns can help strengthen your case when seeking to recover losses.
How Our Investment Fraud Lawyers Can Help
Our elder abuse fraud lawyers have extensive experience representing seniors who have lost money due to broker misconduct. We can help by:
- Analyzing account statements and trading records to identify potential misconduct
- Gathering evidence to support your claim
- Selecting qualified arbitrators for your FINRA arbitration
- Consulting with expert witnesses who can testify about industry standards
- Preparing a strong case for arbitration
- Negotiating with brokerage firms to seek maximum recovery
We understand the devastating effect investment losses can have on seniors and their families. Our firm has recovered over $330 million for investors through FINRA arbitration, and we have over 35 years of experience fighting for victims of investment fraud.
Contact Erez Law, PLLC for a Free Consultation
If you suspect that you or a loved one has been the victim of elder investment fraud, swift action is necessary to maximize your recovery. The experienced investment fraud attorneys at Erez Law, PLLC can evaluate your case and help determine the best path forward for recovering your losses.
We represent clients nationwide on a contingency fee basis, which means you pay nothing unless we recover money for you. Contact us today for a free, confidential consultation to discuss your case and learn how we can help protect your financial future.