From scam phone calls to deceitful contractors, elderly individuals are often exceedingly vulnerable to dishonest financial practices.
But the main source of financial abuse of elders is not these scammers—it is often their own loved ones.
Hanyi (Livia) Yi, an assistant professor of finance at Boston College, is researching ways to combat this daunting problem.
“From a societal perspective, elder financial abuse is a very large issue,” Yi said. “It results in around two billion dollars of losses for seniors every year.”
The U.S. Department of Justice defines elder financial exploitation as the illegal or improper use of an elder’s money, property, or other resources for monetary or personal benefit. This can include theft, misappropriation, concealment, misuse, and more.
According to Yi, the absence of robust financial laws and regulations enables such exploitation. Yi and two of her colleagues, Bruce Carlin, professor of finance at Rice University, and Tarik Umar, assistant professor of finance at Rice University, explore this phenomenon in their 2023 publication “Deputizing Financial Institutions to Fight Elder Abuse.”
Recently, Yi said, new regulatory developments have emerged in an attempt to combat the problem.
“State security regulators called on investment advisors and broker-dealers to help curb elder financial abuse,” Yi said. “These regulations are passed in a staggered fashion that allow these financial professionals to halt suspicious transactions for their senior clients if they suspect that the transactions will result in elder financial abuse.”
The North American Securities Administrators Association (NASAA) Model Act to Protect Vulnerable Adults from Financial Exploitation, adopted in 2016, mandates reporting to regulatory services when qualified individuals believe exploitation has been attempted or has occurred.
The NASAA Model Act was a welcome step in addressing the problem, Yi said, but its impact remained unclear. As a result, Yi and her colleagues set out to measure its effectiveness.
“The way these regulations are designed, these financial agents are empowered to perform this function without being provided explicit incentives,” Yi said. “There is no external reward for stopping the transactions and there is no punishment for not stopping.”
To study the success of these regulations, Yi and her colleagues had to aggregate a large amount of consumer financial data from government databases.
“We built this very large database on our own,” Yi said. “Part of our data comes from FinCEN which is the U.S. Department of Treasury’s financial crimes database. And then from each state’s legislative website—I visited them for all 50 states—I identified state-level laws or statutes or regulations that are relevant for the purpose of our study.”
This process provided the team with the relevant legislation and regulations, including when they passed and went into effect. It also involved speaking with various government offices, notably Texas Adult Protective Services, Yi said.
“They have some data on elder financial abuse cases that are reported to them within the state of Texas,” Yi said. “We also spoke with them about our project to get their insight on whether better data exists.”
Yi said her and her co-authors’ diverse expertise enriched their work, but the team still faced a steep learning curve when it came to understanding existing regulations designed to protect the elderly.
“I had prior work on investment advisers who provide clients with advice on how to manage their assets with a fiduciary duty,” Umar said. “Bruce Carlin has a rich research background on consumer financial decisions. But all three of us had a lot to learn about the regulations in place to protect the elderly.”
The team initially began working on the project in 2019 while Yi was pursuing her Ph.D. in finance from Rice University. She had first met Umar a few years earlier when she was a teaching assistant for his executive MBA class.
“Livia is very easy to work with,” Umar said. “She is extremely friendly, and she is very responsible. She is the kind of person that finishes a task immediately, which really speeds things up.”
The entire study took about four years, according to Yi. During that time frame, Yi moved to BC, and she continued working with her collaborators remotely over Zoom. The team also had to contend with COVID-19 and the challenges the pandemic posed to getting feedback on their work.
“For this paper, we actually presented at about two dozen different conferences and seminars just to be able to polish our research work and to get it ready for publication,” Yi said.
Despite the long road to publication, Yi and Umar said the result made it all worthwhile. The study found the NASAA Model Act was effective in curbing reports of elder financial exploitation, potentially providing a model for how the government can address the issue.
“Given the subject matter, it was exciting to see how empowering the financial sector can be a positive, helping reduce elder financial exploitation, when the popular view may be that financial professionals take advantage of the vulnerable,” Yi said.
Many of Yi’s past publications similarly focus on topics within the social realm of finance, such as aging and public finance costs, and the introduction of riding hailing and its impact on traffic fatalities.
Professor Philip Strahan, one of Yi’s colleagues in the finance department, said Yi’s unique perspective and background make her a valuable addition to BC’s finance program.
“Livia studies public finance, which is an area our department had lacked in the past,”s broaden the scope of research and teaching that she can bring to both her faculty colleagues as well as her students.”
Yi’s research hits home for many personally dealing with the fallout of elder financial abuse in their families, including Strahan, who has seen the effects firsthand.
“This is a really important area and one that hits home for me personally because my aging father fell prey to telephone scammers who convinced him to disclose confidential items related to his bank accounts,” Strahan said. “Livia’s work in this area is incredibly important.”
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