Research that asked more specific questions than other studies found higher rates of victimization
Ontario’s regulatory consultation on its proposed senior protection strategy underscores the need to look out for elderly investors. As the investment marketplace becomes more complex and their cognitive faculties become more impaired, the evidence and statistics that show their increasing vulnerability to financial abuse should come as no surprise.
But new research in the US suggests an even worse reality. “To investigate financial victimization at older ages and the consequences of financial mismanagement, our recent research used the Health and Retirement Study, a nationally representative survey of Americans over the age of 50,” wrote Olivia Mitchell, a professor at the University of Pennsylvania’s Wharton School, in the Wall Street Journal.
The study asked 1,260 respondents whether they’d fallen victim to financial fraud in the past five years, with questions spelling out specific instances. Among the respondents, 3% said they’d made an investment after receiving a free meal and education about an investment opportunity; 1% had bought an investment after getting a cold call or email from a stranger; 1% had put money in penny stocks or investments promising returns of over 10% a day; and 1% had purchased a fraudulent investment recommended by a friend, relative, or financial advisor. In addition, another 1% said they’d bought investments where they’d been knowingly misled.
“All told, almost 8% of the over-50 group admitted that they had fallen prey to at least one of these fraudulent activities over the past five years,” Mitchell said. She added that the exposure to financial fraud uncovered by the study was twice that reported in other studies, which did not probe for specific instances.
Responses garnered to follow-up investigation suggested that almost one third of respondents had experienced other using or attempting to use their accounts without permission, and one third had been exposed to financial scams in the past five years. “This figure is far higher than found in other studies that have asked less detailed questions about victimization at older ages,” she said.