Originally published June 23, 2009: For a little while, at least until the police arrived with an arrest warrant, it must have seemed like the perfect crime.
Authorities charge that Salem County investment adviser Jeffrey Southard systematically bilked elderly clients out of $1.8 million in a Ponzi scheme that unraveled when securities regulators began looking into his business. Southard pleaded guilty last week to preying on elderly clients, who turned over their money to him on the promise of guaranteed annual returns of 6 percent to 11 percent.
Instead of enriching his clients, Southard used much of the money to pay his mortgage, private-school tuition, car payments, and other personal expenses.
The story rated a few paragraphs in the newspaper, but the fact is that schemes by investment advisers and other professionals that target elderly clients are proliferating. The reason is, as Willie Sutton put it when asked why he robbed banks, that is where the money is.
People 50 and over are sitting on a vast pile of wealth - 70 percent of the net worth of U.S. households, according to MetLife, the insurance giant. Those assets have been accumulating over several decades of unprecedented economic growth in the United States.
Some elderly are especially vulnerable because they are physically weakened, emotionally vulnerable, or impaired in other ways that might affect their judgment.
That exposure, along with the potential changes in inheritance rules and the sheer magnitude of the over-60 demographic, is helping to fuel a sharp uptick in business for lawyers who are experts in wills and estates and overall wealth management.
This is a rarefied profession in which lawyers dwell in what is to most souls a terra incognita of abstruse tax laws and IRS opinions, the mastery of which can seem more like sorcery than law.
It grows increasingly complex with the size of the estate.
For all the expertise required in complex estate planning, some estate lawyers, especially at some big firms, traditionally played a secondary role. They're known as service partners and are referred work by rainmaker lawyers with important clients who in addition to their commercial transactions may need some help with their bulging portfolios.
But there are signs that this is changing.
Robert Louis, cochairman of the wealth management and estates and trusts practice at Saul Ewing of Center City, said business was booming so much that he's had to fend off headhunters looking to poach lawyers from his practice group.
That's a change. For all but a handful of practice areas, estates and trusts apparently being one, headhunters seem to have practically disappeared from the legal landscape.
Louis says several factors are driving the business now. One is concern that the Obama administration and congressional Democrats will raise inheritance taxes. That is prompting many persons to structure their estates in ways that limit the tax hit.
"A lot of people have fear of Obama," Louis said.
Louis does not provide financial advice to his clients, but he does suggest ways for selecting financial advisers and helps them review their finances.
He tells clients to steer clear of independent financial advisers who are not affiliated with a large institution that can make restitution if funds are misappropriated. Make sure that the adviser does not have custody of the funds, Louis says, and thus cannot divert the money for his or her own use. That was the case with Bernie Madoff, and indeed, Jeffrey Southard. In both cases, clients turned over funds directly to their advisers, who in turn used the money for themselves.
Good data are hard to come by, but policymakers, financial institutions, and others with a stake in the issue are making stabs at measuring the problem. In a study released in March, MetLife's Mature Market Institute, a research arm of the insurer, concluded that thefts and other forms of financial exploitation of the elderly amounted to at least $2.6 billion a year. The study found professional advisers, such as lawyers and investment advisers, account for the largest group of offenders at about 18 percent, but they were closely followed by family members pilfering funds and other assets.
Other studies have concluded that family members by far commit most of the financial crimes against the elderly, accounting for 50 percent or more of the cases.
Louis has seen plenty of such rip-offs in his career and says that the wealthy, though often having the benefit of good legal advice and presumably more sophisticated than most, are as vulnerable as anyone.
The Bernie Madoff case made this point amply clear.
"A lot of people went to Bernie Madoff; he looked so wealthy and wise," Louis said. "People will trust someone without looking into it. They don't ask, Where is my money going? Wealthy people are not always smarter than people with less wealth."