In 2022, more than 2.4 million people became the victims of financial fraud, losing a total of nearly $8.8 billion, according to the Federal Trade Commission. People of all ages lost money, but the amount was highest for people over 50, and it increased in correlation with the victims’ ages. In other words—and not surprisingly—as we age, we are more likely to be taken advantage of financially.

This is a problem that Marti DeLiema, a University of Minnesota researcher, has spent years trying to solve. In her research, DeLiema surveyed and interviewed thousands of older adults and heard stories about losses ranging from $50 to millions of dollars in scams perpetrated over the phone, through email and social media, and on the internet.

Enlisting a financial ally could be the best defense against these attacks and other fiscal missteps, says DeLiema, an interdisciplinary gerontologist and an assistant professor in the School of Social Work at the University of Minnesota, Twin Cities.

A financial ally, sometimes called a financial advocate, is someone who assists you in managing your financial responsibilities, like paying bills and taxes, filing insurance claims, monitoring retirement accounts, and applying for government benefits. Financial allies can run interference on other potential problems – such as suspected scams – as well.

An ally could be a spouse or partner, an adult child or family member, a close friend, or a paid professional, such as a trust officer, attorney, or accountant. Generally, this should be someone you have known for a long time and are sure you can rely on to make good decisions.

“Your ally is someone you can depend on to have your best interest at heart,” says John Keeton, a CAPTRUST financial advisor in San Antonio, Texas. “You can lean on them to help you make well-informed decisions. This sets the groundwork for your ally to take on more responsibilities if you start to lose interest in decision-making or experience some cognitive decline.”

Cathy Seeber, a CAPTRUST financial advisor in Lewes, Delaware, agrees. She says many advisors will ask clients to name a trusted contact in case questions arise and the client is unreachable or seems to need financial intervention. Similar to a financial ally, a trusted contact is someone your financial institution is authorized to communicate with if you’re unavailable.

Selecting the Right Person

Although some people remain financially sharp as they age, many will experience some cognitive decline, dementia, or an illness that impacts their ability to make critical choices. And those who don’t are still at risk of financial mistreatment. To help people navigate these issues, DeLiema recommends identifying a financial ally by the time you retire, or sooner.

When it comes to selecting the best candidate, people often automatically select their spouse or partner as a first choice because they believe that person understands their finances and will put their needs first. But because of the likelihood of serious health issues or the loss of a partner, DeLiema recommends that everyone choose a backup ally as well—someone who is organized and reliable.

This should be someone you’re comfortable being honest with and who will listen to you. At first, the person might play a consulting role and offer guidance only when asked. Your ally can then assume additional responsibilities over time as their competence grows and as they become more familiar with your financial situation.

However, unless you give them legal authority via a financial power of attorney (POA), they will not have the power to act on your behalf. A financial POA is a legal document that gives someone the right to make decisions about your money and property. DeLiema suggests preparing a POA document early on but signing it only when you think you need regular assistance with daily tasks, such as paying bills and taxes and monitoring investments.

It’s a lot of responsibility, so you want to select the right person to take the driver’s seat at the right time, instead of leaving things to chance. “If you don’t make a decision, you may be manipulated into giving power of attorney to a child who should never be trusted with money,” DeLiema says.

Sometimes people choose financial allies in a way that seems logical to them but it doesn’t always lead to the best results. For example, you might run into problems if you choose:

  • The oldest of your adult children instead of the best qualified;
  • The child who lives closest instead of the one best suited for the work;
  • Everyone in the family to avoid hurt feelings while leaving it unclear whom you want to be in charge; or
  • A spouse or partner who is close to your age without also naming a younger person who can step in when needed.

Navigating Family Dynamics

Instead of choosing just one contact, some people choose to enlist two or more people as their financial allies, Seeber says. “It’s almost like having a personal financial board of directors.” A small group of people working together can also reassure other family members and friends that decisions are being made in the individual’s best interest, she says.

When one adult child is given the authority to supervise a parent’s finances, it can cause hard feelings between siblings. But there are ways to navigate these dynamics by giving everyone separate responsibilities, says Keeton.

DeLiema recommends bringing your family together to tell them about their potential roles in a single group discussion. This way, everyone will know the plan comes straight from you, reducing the risk of future disagreements about how you want your money managed and by whom. She also advises walking your allies through your current accounts, assets, income, expenses, liabilities, and long-term goals.

Building the Foundation for Success

Throughout the process, communication is key. Your ally will need guidance to understand and accomplish what you’re trying to achieve, says Keeton. “Think of the ally as the family’s chief financial officer. You may want to consider coaching your children to manage the family finances. And ideally, you would phase them into that role, not just give them the keys overnight.”

Keeton recommends people introduce their financial ally to their financial advisor. Adult children can be included in financial planning sessions and
tax meetings to show them what you’re trying to accomplish and how you think through big decisions, he says.

Some people are uncomfortable sharing financial information with others, including their children. Utilizing the services of a corporate trustee is an alternative option if you feel that your family members aren’t well-equipped to manage your estate. “This trustee will have a fiduciary responsibility to ensure that decision-making is aligned with your overall estate plan,” says Keeton. Eventually, your ally could become well-positioned to be the executor of your will, he says.

To make things easier for your ally, DeLiema recommends simplifying your finances as much as possible and creating an inventory of your income, debt, and other money needs. Keep this information in one place to make it easier for this person to assist you in the future.