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.
AUTHOR
Malavika Santhebennur
Recommended for you
Compared to four years ago when the divide between boutique and large licensees were largely equal, adviser movements have seen this trend shift in light of new licensees commencing.
As ongoing market uncertainty sees advisers look beyond traditional equity exposure, Fidante has found adviser interest in small caps and emerging markets for portfolio returns has almost doubled since April.
CoreData has shared the top areas of demand for cryptocurrency advice but finds investors are seeking advisers who actively invest in the asset themselves.
With regulators ‘raising the bar’ on retirement planning, Lonsec Research and Ratings has urged advisers to place greater focus on sequencing and longevity risk as they navigate clients through the shifting landscape.
