Can I Sue My Financial Advisor for Elder Abuse?

Financial exploitation of the elderly by a financial advisor can take many shapes and forms, and it is indeed possible to recover one’s financial losses from the broker or financial institution who carried out and supervised the misconduct.  Wrongdoing by a financial professional can be difficult to expose because it often arises out of relationships built on trust, and can go undetected for many years by the affected senior and family members.

Some types of broker misconduct are easier to identify than others.  Cases of outright fraud, for instance, could include the broker forging an elderly customer’s signature, falsely representing the worth or activity in an account, omitting the risks of a particular investment, recommending and selling unnecessary investment products (e.g., certain annuities), or trading excessively in a customer account solely to generate commissions (otherwise known as “churning”).  Regardless of motive or intent, an investor’s financial losses from the misconduct can be no less catastrophic.  If anything, this should point to the incidence rate of financial abuse amongst the elderly to be more prevalent than many people realize.  Indeed, research has shown that American senior citizens lose over $36 billion per year from financial exploitation.  That number is only expected to rise with increasing life expectancy and the expanding demographic of senior citizens within the United States.

Financial elder abuse is also greatly underreported.  According to the National Adult Protective Services Association, only 1 in 44 cases of financial abuse is reported.  The National Center for Elder Abuse points to studies that have identified feelings of shame as being one reason for the underreporting, in part related to the embarrassment of having fallen victim to financial fraud, but also to the embarrassment of having to disclose that one is suffering from age-related memory loss or cognitive decline.  On this latter point, memory impairment of an elderly investor only adds to the underreporting of broker misconduct.

It should be noted that the perpetrators of elder abuse, in general, is most frequently a trusted family member or friend, and not the financial professional.  However, it is no less true that senior citizens are commonly targeted by fraudsters and unscrupulous brokers because older individuals tend to have a greater amount of savings than younger people.  Seniors are also targeted because of their vulnerability to Alzheimer’s and age-related dementia.  For these reasons, it is not surprising that the Wall Street Journal has identified retirement destinations like Florida and California as “hot spots” where troubled, and previously disciplined, brokers tend to cluster.

If you or an elderly family member was taken advantage of by a financial advisor, it is possible to recover your financial losses.  The forum for disputing customer losses in a brokerage account takes place in arbitration before the Financial Industry Regulatory Authority (FINRA), as most brokerage accounts at sign-up contain an arbitration provision, which generally waives the rights of investors to litigate their disputes in court.  In FINRA arbitration, there are no judges, but rather a panel of arbitrators who will hear your case and determine if you are entitled to a damages award.  Though most cases will settle before a hearing, arbitration panels have full authority to award everything from full out-of-pocket losses, to attorneys’ fees, interest, and punitive damages.

Like litigation in court, FINRA arbitration can be an expensive undertaking in terms of cost, emotional drain, and time.  Attorneys who practice in this area will typically offer the client a contingency-fee basis, meaning the client is only required to pay legal fees if the case is won.

One concern for elderly customers, in particular, is that litigation can be drawn out and it can take up to a year or more to have your case heard.  Time is not a friend as one gets older, as retirees do not typically have a stream of income to maintain their livelihoods, nor an endless amount of time to wait for the recovery of their losses.  Attorneys representing elderly clients can somewhat shorten the timeframe by acting quickly to file your claim, but may also apply for an expedited hearing at the time your claim is filed.  FINRA will typically approve cases for an expedited hearing when the claimant is a senior citizen.

Finally, in instances where the financial advisor’s wrongdoing is not discovered until the elderly investor has passed away, an attorney can still bring a case on behalf of the estate to recover financial losses for affected family members and beneficiaries.

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