One of the problems regarding elder financial fraud is average families have not fully considered all the merits of the array of financial products and how they might work to protect them from elder financial fraud.
However, in today's day and age, this is surprisingly an extremely short list indeed. The protection really needs to start at the financial product level and not just be some new advisor practice penalty, fine, new training designation requirement, oversight, etc. usually considered by regulatory groups[i] for ramifications that only occur after the elder financial fraud is committed.
A recent MetLife Mature Market Institute survey estimates the understated annual elder financial fraud loss at $2.9 billion.
Elder financial fraud protection need is dire and only projected to become worse as our population ages and a large segment of this growing group becomes subject to diminished mental capacity risk.
For many seniors this time will stretch from, the last moment of perfect cognitive ability to, when cognitive ability becomes so impaired as to call for some kind of institutionalization or third party intervention. This time usually represents a gradual mental capacity decline, perhaps over decades. As things stand now, one-third of all enforcement actions initiated by state security regulators involve senior citizens[ii].
Such senior protections are in the natural realm of the insurance industry because the industry has the financial products necessary to stop this problem in its tracks before it can even get started in the first place and therefore neutralizing the need for more third party regulator actions.
In this case, I'm talking about mortality pooled annuity contracts and life insurance policies where all family members annuitants/insureds and their beneficiaries are in the same mortality pool. A family that mortality pools together keeps their assets together. Immediate and also reversionary annuity contracts have much more going for them than merely the annual incomes they produce.
Unlike fixed index annuity (FIA) and variable annuity (VA) contracts both with secondary withdrawal guarantees, many life insurance policy designs and investment/savings products of all shapes and sizes, fixed and mortality pooled immediate annuity contracts alongside their reversionary annuity cousins were designed to produce lifetime incomes and too stay the course.
They can't become dissipated because fixed mortality pooled immediate annuity and reversionary annuity contracts are only valuable to their owners and beneficiaries. The contracts' mechanical dynamics protect families under financial duress.
In the annuity purchase suitability determination process, officers at home offices who make such judgments, permitting annuity transactions, need to consider much higher levels of annuitized wealth as a percentage of overall wealth to be appropriate for older individuals.
Certainly, the total of all living expenses and annual payment obligations needs to be considered along with a quality of life premium all adjusted to grow at some annual fixed rate towards the maximum permitted premiums as a percentage of net worth.
