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Literature Review and Environmental Exploration of Retirement-Related Fraud and Financial Exploitation

Purpose

The Society of Actuaries (SOA) Aging and Retirement Strategic Research Program is interested in an environmental exploration and review of literature on fraud and financial exploitation related to retirement.  The major motivation for this research effort is to create a useful reference for retirement actuaries and other professionals on the scope of this issue and inform follow-up research efforts that may encompass both quantitative and qualitative approaches.

Background

Retirees’ financial resources are attractive targets of fraud, scams and financial exploitation since, on average, retirees as compared to those actively working hold higher amounts in savings, investments, businesses they may own and other financial resources. Retirees are also engaged in complicated transactions with high monetary value such as pension cash-outs, purchases of annuities, and rollovers. These can be particularly ripe opportunities for financial fraud and abuse since retirees may rely on family, friends, professionals and others for trusted advice.

As technology has allowed retirees’ resources to be transferred and liquidated more easily and changes in the retirement system have given more control to individuals over their own assets, the increasing risk of monetary losses due to fraud, scams and financial exploitation has become a greater subject of attention for many stakeholders.  Despite the growth of this risk, the SOA’s own research on post-retirement risks indicates that retirees and pre-retirees are less concerned about fraud than many other risks. This finding is puzzling considering the unique challenges that retirees face recovering resources they have lost. Declining mental acuity, declining health and an inability to return to work are specific barriers faced by this population.

Among the motivators for this study is interest in determining positive steps to improve retirement security in the face of this risk. Part of this increased understanding is to examine strategies that may prevent and manage fraud and financial exploitation. There is further interest in how widely such strategies could be used and such strategies can be included as part of the literature search.

There are different organizations and government agencies who have studied fraud, designed taxonomies of fraud, created warning systems about telephone and online frauds, formulated strategies to help respond and recover from fraud, etc.  However, there does not appear to have been an overall systematic look at fraud as it relates to retirement security and retirement plans.  Some of the groups that the SOA is aware of that have focused on issues related to fraud include the Better Business Bureau, CFBP, CFTC, FINRA Foundation, the DOL ERISA Advisory Council, the AARP, SEC, and the Stanford Center on Longevity.  While there are many studies of fraud, the general view is that it is often underreported.

Key Concepts

In conducting their review, researchers should consider the following key concepts and descriptions to help define the scope of their work:

Retirement: refers to either fraud and financial exploitation targeted or perpetrated against a retiree or a retirement related asset or income source such as a pension, Social Security, 401(k) or IRA and Canadian equivalents such as CPP/OAS, RRSPs/RRIFs and TFSAs. 

Fraud, abuse and financial exploitation: For the purposes of this review, researchers should consider the full spectrum of activities that result in the misuse or theft of retiree’s resources for someone else’s benefit. Fraudulent schemes can take a wide variety of forms and levels of sophistication. In between fraudulent and completely legitimate transactions, there are a range of situations, some involving various forms of unethical, questionable or wrong conduct. Some are financial exploitation involving misappropriation of funds and others may be commercial transactions which are legal but not conducted in the best interest of the retiree.  Other transactions may prove not in the best interest of the retiree, even though a family member or agent has not willfully engaged in misconduct. In these cases, the retiree is not well-served because of incompetence and other shortcomings.  As a result, it is not always clear when there is willful financial exploitation vs. an ill-informed series of steps or strategy decisions leading to a poor outcome.

Suspects and perpetrators: For the purposes of this review, researchers should consider the full spectrum of perpetrators including criminals, financial professionals and family members.

Research Objective

The Aging and Retirement Strategic Research Program is seeking researchers to:

  • Conduct a review of studies focused on fraud and financial exploitation related to retirement. Such a review could include identification of points at which there is increased vulnerability and opportunity to protect assets. The range of applicable resources for this search is intended to be reasonably broad and would include government publications, industry publications, consulting firm articles, academic literature, websites and other relevant publications. In addition, the search should identify the variety of forms that fraud and financial exploitation can assume.
  • Consider supplementing the review of literature and government programs through conversations with relevant experts on fraud and financial exploitation.
  • Summarize the most relevant resources reviewed using a consistent format to allow readers to quickly grasp the most important points and with links to the original sources.  
  • Provide an overall synthesis of the material including exhibits that organize the resources by major topic and respective issues.
  • Identify any knowledge and information gaps in the available resources and potential topics that should be addressed in future resources.
  • Recommend approaches for specific follow-up research on fraud and financial exploitation that would be appropriate for the SOA to conduct.

Proposal

To facilitate the evaluation of proposals, the following information should be submitted:

  1. An outline of the approach to be used (e.g. literature search, model, etc.), emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted, and possible limitations of the analysis.
  2. Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted
  3. A description of the expected deliverables and any supporting data, tools or other resources.
  4. Cost estimates for the research, including salaries, report preparation, material costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
  5. A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions. The Aging and Retirement Strategic Research Program is interested in completing this project in a timely manner.  Suggestions in the proposal for ensuring timely deliver, such as fee adjustments, are encouraged.
  6. Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.

Selection Process

The Aging and Retirement Strategic Research Program will appoint a Project Oversight Group (POG) to oversee the project.  The POG is responsible for recommending the proposal to be funded.  Input from other knowledgeable individuals also may be sought, but the POG will make the final recommendation, subject to SOA leadership approval. The SOA's Research Actuary will provide staff actuarial support.

Questions

Any questions regarding this RFP should be directed to Steven Siegel, SOA Senior Practice Research Actuary (phone: 847-706-3578; email:  ssiegel@soa.org).

Notification Of Intent To Submit Proposal

If you intend to submit a proposal, please e-mail written notification by March 16, 2020 to Barbara Scott.

Submission Of Proposal

Please e-mail a copy of the proposal to Barbara Scott.

Proposals must be received no later than April 3, 2020. It is anticipated that all proposers will be informed of the status of their proposal by the end of May.

Note: Proposals are considered confidential and proprietary.

Conditions

The selection of a proposal is conditioned upon and not considered final until a Letter of Agreement is executed by both the SOA and the researcher.

The SOA reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available. The SOA also reserves the right to redirect the project as is deemed advisable.

The SOA plans to hold the copyright to the research and to publish the results with appropriate credit given to the researcher(s).

The SOA may choose to seek public exposure or media attention for the research.  By submitting a proposal, you agree to cooperate with the SOA in publicizing or promoting the research and responding to media requests.

The SOA may also choose to market and promote the research to members, candidates and other interested parties.  You agree to perform promotional communication requested by the SOA, which may include, but is not limited to, leading a webcast on the research, participating in a podcast, presenting the research at an SOA meeting, and/or writing an article on the research for an SOA newsletter.