Financial Elder Abuse Risk

Posted October 14, 2025, By Cole Ferrier

Key Takeaways:

• Financial Elder Abuse Risk is the danger of being exploited by strangers, caregivers, or even family members who illegally or improperly use an older adult's assets.

• This risk is the direct and dangerous consequence of Frailty Risk; cognitive and physical decline create the vulnerabilities that predators exploit.

• Perpetrators are often not shadowy strangers but people the victim knows and trusts, with family members accounting for a shockingly high percentage of cases.

• The best defense is a proactive "security system" built before it's needed: legally appointing trusted agents, naming a trusted contact on accounts, and creating a team of family and professionals who can spot red flags.

In our last article, we explored the internal, creeping challenge of Frailty Risk—the danger that our own declining capacity could undermine our financial plan. Today, we turn to its malicious counterpart: the external threat of Financial Elder Abuse Risk.

If frailty is a bug that weakens your system's internal defenses, financial abuse is the virus or malware designed to exploit that weakness and drain your resources. It is one of the most devastating retirement risks, not just because of the financial loss, which can be catastrophic, but because of the profound emotional betrayal it represents. It preys on trust, loneliness, and the very cognitive decline we discussed in our last article.

As a planner, my engineering mindset views this threat with the seriousness of a cybersecurity expert. You can't just hope you won't be a target; you have to build a robust security protocol and a firewall into your financial blueprint. Protecting your assets isn't just about good investing; it's about making sure you—and only you—remain in control of them.

By the Numbers

• $2.9 Billion: A conservative estimate of the annual financial loss by victims of elder financial exploitation. Some studies that use a broader definition place the figure as high as $36.5 billion. (Source: MetLife Mature Market Institute, "The MetLife Study of Elder Financial Abuse," 2011; TrueLink, "The TrueLink Report on Elder Financial Abuse," 2015)

• 55%: The approximate percentage of perpetrators of financial elder abuse who are family members, friends, neighbors, or caregivers. Adult children are the most common culprits within the family. (Source: "Retirement Risk Solutions," The American College of Financial Services, 2017)

• 1 in 10: The estimated number of adults over age 60 who are victims of some form of elder abuse, with financial exploitation being one of the most common forms that often goes unreported. (Source: National Council on Aging, "Elder Abuse Facts")

From the Case Files

Meet James, an 85-year-old widower who was proud of his financial independence. His son, Mark, had recently lost his job and moved back in to "help out." Mark began by running errands, but soon he was paying all of James's bills and managing his checkbook. James was relieved to have the help. Over the next year, however, Mark started using his father's accounts to pay off his own credit card debts and make "investments" in a failing business venture. By the time James's daughter became suspicious, over $150,000 was gone. The financial loss was devastating, but the betrayal of trust was what truly broke James's spirit.

Understanding the Risk: The Betrayal of Trust

Financial Elder Abuse is the illegal, unauthorized, or improper use of an older adult's funds, property, or assets. It ranges from sophisticated online scams to the slow, methodical siphoning of funds by a trusted family member.

The perpetrators are masters of social engineering. They prey on key vulnerabilities of aging:

• Loneliness and Isolation: A friendly voice on the phone or a "helpful" new acquaintance can feel like a lifeline to someone who is isolated.

• Cognitive Decline: As we saw with Frailty Risk, diminished capacity makes it incredibly difficult to spot red flags, understand complex transactions, or recognize when one is being manipulated.

• Trust and Dependence: When we rely on someone for care or for managing our daily finances, we are in a position of extreme vulnerability. The perpetrator leverages this trust to gain access and control.

The Impact on Your Plan: A System Breach

A successful financial attack doesn't just trigger one risk; it causes a system-wide failure.

• Direct Consequence of Frailty Risk: This is the most direct risk interaction. Cognitive decline is the unlocked door, and financial abuse is the thief who walks through it.

• Interaction with Longevity Risk: A major financial loss early in a long retirement is devastating. For someone in their 70s who expects to live another 20 years, having their nest egg stolen can be an irrecoverable event, completely altering their financial future and that of their surviving spouse.

• Triggering Unexpected Family Responsibility Risk: When one family member is the perpetrator, the financial and caregiving burden often shifts to other family members. Siblings who discover the abuse may have to step in with their own resources to support their parent, triggering a financial crisis in their own lives.

Solutions & Your Risk Mitigation Toolkit

Like a cybersecurity plan, the best defense against financial abuse is a multi-layered security system that is put in place before an attack happens. You need to control access, monitor for threats, and have an incident response plan.

• Tool #1: Legally Appoint Your "System Guardian." This is your primary line of defense. As discussed in the Frailty Risk article, a Durable Power of Attorney (DPOA) for Finances is the legal document that designates a trusted agent to act on your behalf. Choosing this person with extreme care—and considering a professional fiduciary if family dynamics are complex—is the most important step you can take.

• Tool #2: Authorize a "Firewall" with a Trusted Contact. Most financial institutions now allow you to name a "Trusted Contact Person" for your accounts. This is not a person who can make transactions. They are simply someone the firm is authorized to call if they suspect you are being exploited or see unusual activity. It’s a simple but incredibly powerful firewall.

• Tool #3: Run Regular "System Scans." Don't try to go it alone. Create a system of checks and balances. This could mean having a trusted child (who is not your DPOA) receive duplicate statements, or scheduling regular reviews with your fiduciary financial advisor to go over all account activity. This transparency is a powerful deterrent. For high-net-worth families, using a corporate trustee can add a professional, impartial layer of oversight.

• Tool #4: Know the "Help Desk" - Report Suspicious Activity. If you suspect you or a loved one is a victim, do not be embarrassed. Report it immediately. Your local Adult Protective Services (APS) agency is the primary government entity for investigating these cases. Your financial advisor and bank can also be a first line of defense.

A Strategic Defense Against Financial Abuse

Strategically, financial elder abuse is a malicious attack that directly exploits the vulnerabilities created by frailty and cognitive decline. A retirement plan is most vulnerable when it lacks a system of checks and balances, relying solely on an individual's judgment at a time when they may be most susceptible to manipulation by strangers or even trusted individuals.

A resilient plan defends against this with a multi-layered security system put in place proactively. The first layer is the legal appointment of a carefully vetted agent through a durable power of attorney. This is supported by an 'early warning' system, such as a trusted contact person on your accounts, and regular oversight from advisors who can spot unusual activity. The final layer is having a clear response plan, knowing that the first call to make when abuse is suspected is to Adult Protective Services.

Conclusion: The Great Balancing Act

The fundamental trade-off in defending against financial abuse is between maintaining absolute privacy and the protection that comes from transparency with a trusted few. It can feel uncomfortable to let someone else "look over your shoulder." However, the "great balancing act" is recognizing that in the face of this insidious risk, a well-chosen system of checks and balances isn't a loss of independence. It is the only way to truly guarantee it, ensuring that the only person who benefits from your life's work is you.

Create Your Financial Compass with Us

Protecting our clients from financial exploitation is one of our most sacred duties as fiduciary advisors. We can help you build the systems, have the difficult family conversations, and create the team you need to keep your assets safe. Contact us today.

Resources:

• Consumer Finance Protection Bureau (CFPB) - Resources for Older Adults: Provides excellent guides on preventing financial exploitation and managing someone else's money. (www.consumerfinance.gov/consumer-tools/older-adults/)

• National Center on Elder Abuse (NCEA): A national resource center with information and links to state-level reporting agencies. (ncea.acl.gov)

• National Adult Protective Services Association (NAPSA): Provides information and a locator for local Adult Protective Services (APS) offices. (www.napsa-now.org)

• Eldercare Locator: A public service to connect you with local services for older adults and their families, including legal aid. (eldercare.acl.gov)