Cognitive decline could spur financial fraud
Ageing clients and investors are more at risk of becoming victims of financial fraud and abuse as a result of cognitive decline and they may not consult their financial adviser, a State Street Global Advisor study has found.
The study, titled ‘The Ageing Brain: The Impact of Ageing on Financial Decisions", found investors who began to experience cognitive decline but had no plan for financial decision making were most vulnerable to financial scams from strangers and financial abuse from family and friends.
The firm's vice president and head of practice management, Brie Williams, said the most common scams were Medicare/health insurance fraud, and funeral and cemetery scams, but noted cases were severely underreported.
"The numbers are under reported because many find it to be quite embarrassing if they find themselves becoming a victim of fraud," Williams said.
The paper quoted figures from a Monash University study commissioned by States Trustees, which found that five per cent of Australians over the age of 65 have faced abuse.
The reason behind this was directly related to overconfidence, which could occur due to cognitive decline as one aged, rather than ageing itself.
"It's just a function of age and changes in your risk mindset. As we age our confidence is not impacted. So we may take more risk than we would have in our forties, just because we feel better about what we believe to know is true," Williams said.
She added that clients might not have the same checks and balances as they got older.
"Your risk behaviour may become more aggressive if you've been conservative your whole life," she said.
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