How advisors can protect clients against financial fraud

Education key ... and there are several precautionary techniques available

How advisors can protect clients against financial fraud

As fraud is rapidly increasing, so are the attempts to curb it – and advisors can play an important role in helping to protect their clients from it.

“The reported fraud is up 40%. Last year, it crossed the half a billion dollar mark,” Vivianne Gauci, a senior vice-president with HomeEquity Bank, which recently launched its anti-fraud campaign, told Wealth Professional.

“We think that’s very underreported because people tend to be embarrassed to talk about the fact they have been scammed. The Canadian Anti-Fraud Centre thinks that probably only 5% to 10% of people actually report fraud.”

Gauci noted that advisors can help their clients by being proactive in educating their clients, so they learn how to prevent it from happening in them and their families. She noted clients may be particularly vulnerable for romance, tech, real estate, or grandparent fraud, so there are several precautionary techniques that advisors can pass on to clients.

Romance scams, which often happen online and over social media, have been increasing. They’re now the number two driver – next to cryptocurrency – of dollars lost in reported fraud. Gauci said clients should be warned that the other party may be grooming them to ask for money and be wary if the online relationship seems to be moving too quickly.

“It doesn’t have to work for many people. Even If it works only 1% of the time, they end up being able to ask the person they’ve engaged for money,” she said. “Then, once the person sends money, the other person disappears.

“So, advisors should start to question if one of their clients suddenly comes to them with a money request, especially a sizable one, from someone he or she hasn’t met yet or who lives overseas or who wants them to visit. That’s one of the key things for advisors to watch for if they’re talking to clients about romance scams.”

In fact, Gauci said any sizable or unexpected request can raise a red flag for an advisor, who can also warn clients about getting caught in a technology scam. Older Canadians, aged 55 or more are particularly vulnerable to fraudsters approaching them and saying there’s something wrong with their computers, so the scammer need access to fix, or upgrade, it. Advisors may be able to flag it with the client, too, if they see a website pop-up that refers them to a helpline.

Advisors can help their clients protect themselves from real estate scams by ensuring they protect their identity since the fraudsters assume it to sell someone’s home. Advisors can recommend that their clients ensure that they shred their documents, particularly statements, and not leave their homes unoccupied for any significant amount of time, particularly if they are snowbird.

The final one to warn clients to watch for, especially if they’re older or have aging parents, is the grandparent scam where fraudsters typically pretend they’re a grandchild in trouble. That’s become more common with advances in audio technology that can make the criminals sound like a grandchild in danger. Fraudsters also pretend they have a cold or are in hospital if questioned.

“The scammers tend to rely on the fact that the grandparent knows this is a loved one and is concerned for their well-being,” said Gauci. But, advisors can impress on clients to beware if those calling pressure the family member to act quickly. Advisors can also monitor if there are any large withdrawals or requests for them.

Knowledge is power, so I’d encourage advisors to share the videos that we’ve done with their clients so they can watch for some of the red flags,” said Gauci. “But, the number one thing that advisors can advise their clients to do is to always take a moment to pause. Tell them not to rush to act, and then ask questions, that would help - especially If the person on the other end of the phone line is telling them they need to keep it a secret. Ensure they know that it’s okay to take the time to ask a friend or family member what they think. It’s always good to take a moment to pause before they pay.”