Wells Fargo, Morgan Stanley and Fidelity discuss fraud prevention

Financial advisors play a major role in preventing fraud and exploitation of older adults, but in some situations they must rely on their firm’s hardened teams and systems, experts say.

Wealth managers and advisers from companies such as Wells Fargo Advisors, Morgan Stanley, Fidelity Investments, Commonwealth Financial Network and Lincoln Investment must work in tandem to reduce the worrying level of fraud and elder abuse in industry and connect to a pilot program designed for better collaboration with authorities, according to May 4 panelists session held by the North American Securities Administrators Association.

The more than half a dozen experts refrained from assigning blame for particular cases that emerge like clockwork every week across the industry, with varying amounts of refund on the dollar for the losses of defrauded customers. However, they recognized the critical ability of advisors and other client-facing finance professionals to sound the alarm in their businesses. In some situations, however, counselors can exceed the need in detrimental ways.

For example, differing rules from state to state or even county to county about which agencies to notify of senior fraud make it important for counselors to alert their businesses. rather than contacting authorities directly, according to Ron Long, director of Wells Fargo. elderly client initiatives.

“Reporting elder financial abuse to adult protective services multiple times just starts the conversation,” he said. “Be absolutely clear: the financial advisor on the scene should almost never, ever be the person who picks up the phone when calling Adult Protective Services, except in the event that they should call 911 if there is a problem. physical, or in front of them, they see badly in class. And it could be worse if they don’t call law enforcement to intervene immediately. But you want the centralized team to write these reports, do background work.

One place where advisors can take more direct action revolves around establishing a “trusted contact” in accordance with FINRA’s senior operating rules. At Edward Jones, about 70% of the company’s accounts listed them after the company took steps to engage certified advisors and assistants in the effort and reminded customers of the importance at any age due disasters like the California wildfires, according to Richard Szuch, director of enforcement for the New Jersey Bureau of Securities and chairman of NASAA’s Major Issues and Diminished Capacity Committee.

The task is “very important” and is “certainly a FINRA priority,” said Thomas Mierswa, Morgan Stanley’s executive director of the branch advisory group within the firm’s legal and compliance division.

“Customers are often reluctant to let others know where they have their money, how much money they have,” Mierswa said. “And they fear that line will be crossed, even with the most trusted people who they know still want to maintain a distinct distinction. So, like many other companies, we are looking for creative new ways to put pressure on this, in addition to educating financial advisors on the fact that they should constantly ask clients about this.

According to Nancy Heffner, Lincoln’s chief compliance officer, advisors and companies should also exercise extreme caution when talking to potential victims of scams when they appear in their networks.

“This is a breach of trust issue, and they’re not going to come and say, ‘Oh, thank you so much for letting me know I was scammed and they took everything. my money,'” she said. “They come from a defensive position because they often believed what they were told, hook, line and sinker. And so you need to empathize with them and not treat them as if they are stupid or dumb because they fell for this scam. While this may be a scam we’ve heard about time and time again, they should be treated as individuals. »

That’s why advisers can often help companies gather information about a possible case of fraud by joining their company’s investigators in such discussions, said Heather Murphy, deputy director of anti-money laundering at the Commonwealth.

“There are times when it’s very beneficial, depending on the relationship, to have the advisor on the phone with me or one of the analysts on my team while you ask a lot of prying questions of strangers because I think that helps, in particular, with this report,” Murphy said. “Otherwise, we try to keep our units separate, especially when making decisions about deal blocks.”

The high stakes make it important for companies to continually train all members of their teams on “red flags and warning signs,” according to Debbie Noury, senior director of senior financial investigations at Fidelity.

“If someone has had the experience of someone with Alzheimer’s disease or reduced capacity, it’s often your finance manager who identifies them first,” Noury ​​said. “He’s not a family member. They are sometimes too close. They don’t want to acknowledge it. They don’t want to see it, do they? Often it’s really someone, you know, your advisor or your banker or someone in that space.

In an effort to build the capacity of authorities at all levels and multiple types of government agencies to work with financial companies, the Ministry of Justice has approved the creation of a pilot program called HelpVul in 2018 to test the idea of ​​a centralized reporting system, said Marin Gibson, associate general counsel for state government relations with the Securities Industry and Financial Markets Association. Currently, five states and about two dozen companies are participating in the effort to share investigative documents and talk instantly in real time.

“We wish there weren’t so many cases,” Gibson said. “The most important thing is increased collaboration and coordination. I even think one of the benefits that wasn’t necessarily apparent on paper was just getting people from different agencies and states to get used to working with each other. They may not have known each other before, and now they have some sort of effective working relationship.

The program will pay off down the road, with an expected increase in the number of cases during rising equity volatility and inflation this year, according to Szuch.

“We’re dealing with the workload that we’re dealing with in 2022,” he said. “Is there any doubt that the numbers will increase? There is no doubt. And so anything that can be done to redirect time that would be spent on the reporting process towards finding solutions in the space is simple elegance, frankly.