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Fraud comes in a variety of shapes and sizes with one of the most pervasive forms being financial. Financial fraud is a sprawling concept – one that includes malfeasance perpetrated by companies, securities-related chicanery and bad acts aimed directly at consumers.
While consumer-directed financial fraud isn’t yet a point of emphasis for many advisors, it should become a higher priority for several reasons. First, protection and prevention actually jibe with the increasingly popular holistic practice structure. Second, it’s a sensible addition to a practice’s suite of product offerings, particularly when considering many clients, even a majority of them at some practices, are baby boomers or older – prime demographics for perpetrators of financial fraud.
Third, the world is increasingly digital and while that’s stoking convenience, it’s also exposing vulnerabilities that fraudsters are exploiting. And last, but certainly not least, financial fraud is expensive and time-consuming for victims. Read on for more important details.
Widespread Effects of Financial Fraud
Data confirm the reasons why advisors should make financial fraud prevention and protection part of their toolkits.
“The latest Bankrate Financial Fraud Survey reveals that about 1 in 3 U.S. adults (34 percent) have experienced financial fraud or a scam in the past 12 months, since January 2024. Among them, nearly 2 in 5 (37 percent) lost money,” according to the research firm.
Add to that, two-thirds of have encountered some form of financial fraud or scamming at some point during their lives implying that many clients may already be more familiar with these grifts than advisors realize. And while older people are favored targets of financial criminals, those bad actors don’t discriminate based on age. That’s something for advisors to keep in mind.
“Baby boomers (ages 61-79) and Generation Xers (ages 45-60) are most likely to have ever experienced a financial scam or fraud at 73 percent and 71 percent, respectively,” adds Bankrate. “Still, Gen Zers (ages 18-28) and millennials (ages 29-44) aren’t immune, at 63 percent and 64 percent, respectively.”
There is another demographical element that plays out when it comes to financial fraud. Its victims are often those that can least afford it. Commonalities among victims of financial fraud include recent denial of credit and lack of cash reserve. That is to say high-net-worth clients, though not immune, aren’t the typical victims of financial fraud.
Protective Measures
As noted above, advisors likely aren’t spending significant time on fraud prevention tips. The good news is they don’t need because they can draw effective inspiration from a variety of sources, including past victims.
“Almost 9 in 10 Americans (89 percent) have taken measures to protect themselves from scams in the past year,” concludes Bankrate. “That includes people who have updated their passwords, enabled two-factor authentication, avoided clicking suspicious links, set up spam filters, monitored their financial accounts, checked their credit reports, searched for common spam information, reported suspicious activity or shredded sensitive documents.”
Bottom line: it’s not difficult to help clients guard against financial fraud. Some simple tips and tricks can go a long way toward prevention.
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