Part of a financial advisor’s job is to alleviate a client’s anxiety about money. Now more than ever, a related anxiety involves losing money to fraudsters.
XAutoplay: On | OffAdvisors who serve as anti-fraud advocates find an entirely new way to add value to their client relationships. Steering individuals away from potentially costly scams affords peace of mind to harried consumers, especially seniors who may fall prey to cyberattacks or other deceptive schemes.
“Today, more people understand that we as advisors can help prevent fraud,” said Christian Cordoba, a certified financial planner in El Segundo, Calif. “It can be a big differentiator. We can get out ahead of it through discussions, education and awareness-raising.”
The scourge of fraud hit home for Cordoba in 2014, when a single client in his 80s fell victim to a scam. Informed that he won the lottery, the elderly man wired over $3,000 to the caller.
When the fraudster requested more money before releasing the supposed lottery winnings, Cordoba’s client maxed out his credit cards. Only when he sought to withdraw funds from his investment account did he alert Cordoba of the situation.
“We managed the rest of his assets so we got involved when he called us,” he said. “Coupled with the frequency and amounts being requested, it created a pattern that concerned us.”
Today, Cordoba cites the scam as a cautionary tale in his public seminars — and highlights his role in helping clients avoid massive fraud losses.
“A lot of people think, ‘It’ll never happen to me,’ ” he said. “Then they hear this story” and other examples of elder fraud and identity theft, and they join forces with their advisor to become more vigilant.
Fight Online Scams
Over the past year, Cordoba highlights two new types of fraud. First, he’s hearing about scammers pretending to represent the Internal Revenue Service over the phone or via email. And he’s warning clients not to wire money to anyone based on an email plea, even if it appears to come from someone they know, such as a grandchild.
“It’s always better to call to confirm rather than rely solely on an email request,” he said.
For advisors who gain expertise in fraud prevention, the challenge often becomes increasing their client outreach. Knowing how to stop scams is only half the battle.
“We tell clients that you need to talk to us when you’re making major financial decisions,” said Matt Archer, an advisor in Raleigh, N.C.
As an example, he recalls a client — a widow in her 70s — who met someone through online dating who repeatedly asked her for money. She wound up wiring over $100,000 and took out a loan to send even more funds.
“She had a hard time telling me about it,” Archer said. “This was over 18 months ago and she’s still paying back the loan.”
To prevent fraud, Archer now communicates more frequently with clients whenever they request a wire transfer. He also alerts them about the dangers of social media and how some online networking sites geared for seniors are often targets for tricksters.
As part of his efforts to help clients combat fraud, Archer updates them about best practices in cybersecurity and shares steps to ward off threats. He emails clients about illegal schemes and forwards Better Business Bureau scam alerts.
“We overcommunicate with clients via newsletters, emails and social media,” he said. “We want to stay top of mind, and educating clients on how to fight fraud helps us do that.”
In order for advisors to offer fraud prevention tips, they need to sharpen their knowledge of a rapidly evolving field. That requires a commitment to learning about the latest scams — and how their clients can guard against them.
Archer participates in online training programs sponsored by his firm’s broker-dealer. A recent session covered cyberhacking and installing firewalls.
Similarly, John McCafferty takes classes on fraud prevention measures offered by his firm, Edelman Financial Services in Alexandria, Va. He has learned how to spot warning signs of money laundering and phishing (emails that lure people to reveal personal data).
“There are savvy fraudsters and they’re getting savvier as time goes on,” McCafferty said. “That’s why we differentiate ourselves by taking the time to talk about all this. Clients are often pleasantly surprised when I suggest they take anti-fraud action steps.”
McCafferty tailors his fraud prevention advice to address each client’s needs. For instance, he might urge midcareer professionals to get their aging parents an unpublished phone number to minimize junk calls. Or he might propose that an entrepreneur who runs a business from home use a paper shredder to dispose of credit-card mailers and other unwanted material that contains personal data.