August 2019 Notes Along the Path
Topics for this month:
Make sure you and your parents or other loved ones know how to
dodge the 9 top elder frauds
You’ve saved money as best you could. Or, maybe you sold your business after investing years of hard work. You’ve chosen the smart path and have or are building a comfortable nest egg.
So you must always be on guard. Criminals seek to trick you into willingly handing over your hard-earning savings.
I hope I have your attention.
If you are not a target for "Elder Fraud" you probably have someone close to you who is. Did you know that elder financial exploitation quadrupled from 2013 to 2017, according to the Consumer Financial Protection Bureau.
Specifically, these activities originated from unknown scammers, family members, caregivers, or someone in a nursing home. They involved more than $6 billion, with an average loss of $34,200. But in 7% of these instances, losses exceeded $100,000.
In 2017, elder financial exploitation reports totaled 63,500. Sadly, these reports probably represent just a small fraction of actual incidents.
According to the FBI, more than 2 million seniors were victimized in the past year.
Even former FBI Director William Webster, 95, was targeted in 2014.
Webster was promised $72 million and a new car…if he paid several thousand dollars to cover shipping. Ultimately, the caller was arrested. But not before his relatives in Jamaica had successfully scammed other U.S. citizens out of hundreds of thousands of dollars.
It won’t happen to me? If you’re thinking, “This can’t happen to me,” think again. The best and brightest can fall victim to a seasoned swindler.
While scams are only limited by the criminal imagination, the U.S. Senate’s Committee on Aging highlighted some of the more common scams in a report entitled, Fighting Fraud.
Included are the top nine scams. Please familiarize yourself with this list. Personally, I can recall being targeted with 1,2,6, and 9 -- how many have you experienced? If you have any questions, we would be happy to talk with you.
1. IRS impersonation scams
Scammers impersonating IRS officials claim you owe money and pressure you to settle immediately. If victims make an initial payment, they will often be told that new discrepancies have been found in their tax records, which must be satisfied with another payment.
Don’t fall victim! The IRS will never call you to demand immediate payment. If there is a question about your return, you’ll receive a letter, and there is a process to appeal any disputed amount.
2. Robocalls and unsolicited phone calls
Robo-dialers can be used to distribute prerecorded messages or connect the person who answers the call with a live person. IRS scammers may use this tactic.
Robocalls often originate overseas, and numbers are usually spoofed to hide their true identity.
Have you recently received a call from someone whose phone number has your prefix? If you don’t recognize the number, it’s likely spoofed and not local.
The FTC has warned not to give out personal information in response to an incoming call. Identity thieves are clever. They often pose as bank representatives, credit card companies, creditors, or government agencies. They hope to convince victims to reveal their account numbers, Social Security numbers, mothers’ maiden names, passwords, and other identifying information.
Unsure who you are talking too? Just hang up the phone.
3. Sweepstakes scams / Jamaican lottery scam
Sweepstakes scams continue to claim senior victims who believe they have won a lottery and need only take a few actions, i.e., sending cash to the con artists in order to obtain their “winnings.”
Sometimes, it’s best not to answer a call if you don’t recognize the number. If it’s a friend, they’ll leave a voicemail message.
4. “Can you hear me?” “Are you there?” scams
The goal: get your voice print saying, “Yes.” Then, the scammer charges your credit card using your “Yes.”
If asked, don’t respond. Just hang up. If you get a call, don’t press 1 to speak to a live operator to be removed from the list. If you respond in any way, it will likely lead to more robocalls–and more scams.
5. Grandparent scams
“Hi Grandma/Grandpa, guess who?” When you respond, “This sounds like ‘Sally’,” the fraudster will say “she’s” in trouble and needs money to help with an emergency, such as getting out of jail or paying a hospital bill.
If you send cash, expect “her” to call you again, asking for more cash. Victims who were duped later said they had wished they had asked some simple questions that only their true grandchild would know how to answer.
6. Computer tech support scam
Whether a computer pop-up screen or an alleged caller from Microsoft, scammers claim your PC is infected with a virus. Please note, Microsoft will never call you to inform you they have detected a virus.
Do not give control of your computer to a third party that calls you out of the blue. Don’t give them your credit card.
7. Romance scams
More and more Americans are taking to the Internet to find a partner. While some find love, others find financial heartache.
Be wary of individuals who claim the romance was destiny or fate. Be cautious if an individual declares his or her love but needs money from you to fund a visit. Or claims cash is unexpectedly needed to cover an emergency. These are huge red flags.
8. Identity theft
This was the most common type of consumer complaint in 2016, with nearly 400,000 complaints.
Placing a freeze with the major credit bureaus helps prevent credit cards or loans from being taken out in your name. If you believe you are a victim, call the companies where the fraud occurred, place a fraud alert with the credit bureaus, and file a report with your local police department.
9. Government grant scams
In the most common variation of this scam, consumers receive an unsolicited phone call from a con artist claiming he or she is from the “Federal Grants Administration,” or the “Federal Grants Department”–agencies that do not exist.
Always remember, grants are made for specific purposes, not because you are a good taxpayer.
Do not wire funds to cover fees for the so-called grant. Government grants never require fees of any kind. If you do, you’ll likely get more requests for additional unforeseen “fees.”
And, don’t give out bank information or personal information to these swindlers. Scammers pressure people to divulge their bank account information so that they can steal the money in their account.
You wouldn’t give bank information to a stranger at the supermarket. You don’t know them. So, why give personal information to someone you don’t know who unexpectedly contacted you?
Always remember, you are in control. When in doubt, hang up.
That is how you protect yourself.
If you suspect elder financial abuse, the https://www.aba.com/consumers/pages/protectingtheelderly.aspx American Bankers Association suggests the following steps:
• Talk to elderly friends or loved ones. Try to determine what may be happening to their financial situation, such as a new person “helping” them with money management, or a relative using cards or credit without their permission.
• Report the elder financial abuse to their bank. Enlist their banker’s help to stop it and prevent its recurrence.
• Contact Adult Protective Services in your town or state for help. Report all instances of elder financial abuse to your local police—if fraud is involved, they should investigate.
As always -- be on alert.
Attached is a list of useful tips. Place it near your phone. These cards can be a useful tool to help protect you against swindlers.
Our mission is to help you reach your financial goals. We are proactive in our recommendations, but sometimes a good defense is the best offense. It’s heartbreaking to hear stories of theft. We don’t want you to become a victim and another government statistic.
The Economy – August Market Update
The first rate cut since the financial crisis
On July 31, the Federal Reserve reduced the fed funds rate by ¼% to 2.00-2.25%. It was the first rate cut since the financial crisis.
Going forward, guidance was vague. While Chairman Powell left the door open to at least one more cut, it’s not assured.
The rate cut isn’t in response to a faltering economy. The Fed said, “Economic activity has been rising at a moderate rate.” I don’t dispute this characterization.
Yet, in an 8-2 decision (the dissenters wanted to keep rates unchanged), the Fed said it cut in order to “insure against downside risks from weak global growth and trade policy uncertainty.”
Last month we recalled that falling interest rates in 2001 and 2008 failed to stem the outflow out of stocks as economic growth faltered. And, rising rates between late 2015 and September 2018 didn’t squash the bull market. During the mid-1980s, mid-1990s, and late 1990s, rate cuts by the Fed, coupled with economic growth, fueled market gains.
What was the one common denominator that determined the direction of the market? It was the direction of the economy.
That’s not to say that a rate-cut cycle in the middle of an economic expansion didn’t aid the market’s rise, but the economy and corporate profits have historically been the most important factors that determine the longer term direction of stocks.
Steady as she goes
Gross domestic product, which is the broadest measure of economic activity, slowed from Q1’s 3.1% annualized pace to 2.1% in Q2 (U.S. BEA).
While soft business spending is probably a reaction to the global slowdown and uncertainty caused by trade tensions, consumer spending rebounded sharply.
Job growth is solid. First-time claims for unemployment compensation are low, the unemployment rate is below 4%, and consumer confidence is strong.
If we average Q1 and Q2, growth is a respectable 2.6% as we head into the second half of the year.
Maybe, just maybe, consumers aren’t paying attention to what’s happening on the trade front and are much more focused on their own situation. We can take a lesson from that.
Table 1: Key Index Returns
Dow Jones Industrial Average
S&P 500 Index
Russell 2000 Index
MSCI World ex-USA*
MSCI Emerging Markets*
Bloomberg Barclays US
Aggregate Bond TR
Source: Wall Street Journal, MSCI.com, Morningstar, MarketWatch
MTD: returns: Jun 28-Jul 31, 2019
YTD returns: Dec 31, 2018-Jul 31, 2019
*in US dollars
What to do
Control what you can control.
You can’t control the stock market, you can’t control headlines, and timing the market isn’t a practical hope. But, you can control the portfolio.
Your plan should consider your time horizon, risk tolerance, and financial goals. There is always risk when investing, but a competent, fiduciary advisor makes recommendations with all of those elements in mind.
As I’ve said before, the plan is also designed to remove the emotional component – the reptile brain that encourages the average investor to sell near the bottom out of fear and encourages greedy buying when stocks are soaring.
If you’re feeling unsure these days or have questions, let’s have a conversation. That’s why we’re here.
As always, I’m honored and humbled that my clients have allowed me to serve as their financial advisor.
All the Best!
Your Best Path Financial Planning
About Gordon Achtermann Investment advisor representative of and investment advisory services offered through Garrett Investment Advisors, LLC, a fee-only SEC-registered investment advisor. Tel: (910) FEE-ONLY. Your Best Path Financial Planning may offer investment advisory services in the State of Virginia and in other jurisdictions where exempted.