What Financial Advisors Need to Know About Elder Financial Exploitation Laws

Elder financial exploitation has been called an epidemic. AARP estimates that it’s a $28 billion annual problem in the U.S.—with losses topping $77 billion worldwide, according to NASDAQ.

The problem is so widespread that states have increasingly been enacting laws to protect older adults. Many of those laws require broker-dealers and investment advisers to play a role in preventing elder financial exploitation.

The push to involve the investment industry in protecting seniors began in 2015 with the creation of the North American Securities Administrators Association’s Model Act to Protect Vulnerable Adults from Financial Exploitation. Since then, 38 states have enacted legislation based on the model act, and several more have pending legislation.

With more and more states addressing elder financial exploitation through legislation, financial advisors need to be aware of new requirements and take steps to put systems in place to protect vulnerable clients.

New legislation impacting broker-dealers and investment advisers

Three states enacted legislation or revised existing laws in 2023 to give broker-dealers and investment advisers tools to detect and prevent elder financial exploitation. In 2024, one state has already enacted a new law.

Georgia: Gov. Brian Kemp signed The Senior Protections from Exploitation Against Retirees Act in May 2023.  The act, which took effect July 1, 2023, amends the Georgia Uniform Securities Act of 2008 to give broker-dealers and investment advisers the authority to slow down transactions when exploitation is suspected. They can delay disbursements for 15 to 25 business days from accounts belonging to adults 65 and older or any adults who are physically or mentally incapacitated or have Alzheimer’s disease or dementia. They also are required to report suspected financial exploitation.

Kansas: In April 2024, Gov. Laura Kelly signed House Bill 2562, which requires broker-dealers and investment advisers to report suspected financial exploitation of vulnerable adults and adults 60 and older and allows them to delay disbursements 15 to 25 business days if exploitation is suspected.

‍Michigan: In December 2023, Michigan enacted House Bill 4197 requiring broker-dealers and investment advisers to report suspected financial exploitation of vulnerable adults. The law, which took effect in March 2024, allows broker-dealers and investment advisers to delay disbursements 15 to 40 business days from accounts of vulnerable adults if financial exploitation is suspected.

Wyoming: The Wyoming legislature enacted legislation in February 2023 requiring broker-dealers, investment advisers and financial institutions to report financial exploitation of vulnerable adults. A prior law had required anyone to report suspected abuse, neglect or exploitation, but this law specifically defines the responsibility of broker-dealers and financial institutions to help prevent exploitation. The new law also allows broker-dealers to delay transactions on accounts of vulnerable adults for five to 30 business days if financial exploitation is suspected. 

All of the new laws grant broker-dealers immunity from civil liability for denying account holders immediate access to their money when exploitation is suspected.

Pending legislation impacting broker-dealers and investment advisers

There also is pending legislation in several states that would impact the role that broker-dealers and investment advisers would have to play in preventing financial exploitation if passed. 

Illinois: Introduced in February 2024, Senate Bill 3804 amends the Adult Protective Services Act to require broker-dealers and financial institutions to report suspected financial exploitation of disabled adults and adults 60 and older.‍

Massachusetts: Introduced in 2023, Senate Bill 2460 and House Bill 4124 would require broker-dealers, investment advisors and financial institutions to report suspected financial exploitation of disabled adults and adults 60 and older. They would be allowed to delay transactions for 15 days when exploitation is suspected and would be immune from civil liability for such actions.

Pennsylvania: House Bill 2064 introduced in February 2024 would allow financial institutions and fiduciaries authorized to manage some or all of an older adult’s financial affairs to report suspected financial exploitation of older adults to adult protective services, law enforcement and authorized representatives of older adults and to delay disbursements for 15 to 25 days when exploitation is suspected. 

New York: A bill introduced in the New York Senate would amend an existing law to allow broker-dealers and investment advisers to delay disbursements from accounts of adults 65 and older for 15 to 25 business days if financial exploitation is suspected.

Existing laws

These states had laws based on the NASAA model act prior to the 2023 legislative session.

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• Alabama Act 2016-141 (2016)
• Alaska HB 170 (2018)
• Arizona SB 1483 (2019)
• Arkansas SB 151 (2021)
• California SB 496 (2019)
• Colorado HB 17-1253 (2017)
• Delaware HB 332 (2018)
• Florida HB 813 (2020)
• Hawaii HB 940 (2021)
• Indiana Act 221 (broker-dealers, 2016); Act 1526 (investment advisers, 2017)
• Iowa HF839 (2021)
• Kentucky HB 93 (2018)
• Louisiana Act 580 (2016)
• Maine LD 566 (2019)
• Maryland HB 1149 & SB 951 (2017)
• Minnesota HF3833 (2018)
• Mississippi SB 2911 (2017)
• Montana SB 0024 (2017)
• Nebraska LB 297 (2021)
• New Hampshire SB 252 (2019)
• New Jersey A-5091 (2020)
• New Mexico HB 0326 (2017)
• North Dakota SB 2322 (2017)
• Ohio HB110 (2021)
• Oklahoma Okla. Admin. Code § 660:11-15-2 (2020)
• Oregon SB 95 (2017)
• Rhode Island S 433 (2019)
• South Carolina: S425 (2021)
• Tennessee SB1192 (2017) & HB 0304 (2017)
• Texas HB 3291 (2017)
• Utah SB 88 (2018)
• Vermont V.S.R. § 8-5 (2016)
• Virginia SB 1490 & HB 1987 (2019)
• West Virginia HB 4377 (2020)

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Tools to help financial advisors protect older customers

‍New technology can help financial advisors protect older clients from fraud and exploitation and catch small issues before they become big problems. For example, Carefull partners with wealth management firms to protect their older clients from fraud, scams, money mistakes and more. 

Senior-specific technology to monitor for fraud and exploitation 

Financial advisors can instantly differentiate and expand the client experience for high net worth clients by offering Carefull's financial safety service to provide 24/7 monitoring of their finances, credit and identity for issues specific to older adults—backed by $1 million in identity theft insurance coverage.

Carefull becomes an integrated presence in clients’ lives without advisors needing to do the work themselves to provide constant account monitoring. And it gives advisors countless opportunities to be a hero to clients and families when Carefull catches issues before they become big problems. 

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A trusted contacts system

One of the key features of Carefull that sets it apart from other financial safety services and makes it particularly useful for financial advisors is its Trusted Contacts feature. Offering clients a platform that makes it easy to engage their trusted family members in protecting them against scams, fraud and elder financial exploitation can go a long way toward maintaining their financial well-being as they age. It also offers you an opportunity to connect with clients’ family members, win their trust and potentially bring them in as clients ahead of wealth transfer.

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Integrated content specifically for older customers

Education can go a long way toward protecting older clients from fraud and exploitation. This includes alerting customers to scams, providing articles about staying safe online and avoiding fraud, and offering financial education video courses or webinars. 

Through its team of financial journalists and experts, Carefull provides all of this content to its financial advisor partners. Carefull also offers webinars on topics ranging from avoiding fraud and scams to having family money talks. Carefull’s team handles all of the logistics of these webinars, so there’s no extra work for you—only the benefit of increasing communication with clients.

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To learn more about how Carefull can help your firm protect older clients against elder financial exploitation, get in touch with our team.

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