In his recent WSJ article, wealth advisor Paul Hynes raises this question. He points out that financial advisors are in a unique position to observe their clients over years, sometimes decades and they know their clients’ normal patterns and general life situations.
I am particularly interested in the subject and I agree with Mr. Hynes that advisors are well positioned to learn of changes in clients’ lives and to see red flags such as unusual activity in their accounts. He suggests that advisors should stay in communication with their clients’ families and that Adult Protective Services can be contacted if abuse is suspected. Here is where I question his advice as falling a bit short of what can be done.
As part of the national legal community dedicating time to the protection of vulnerable elders I see communications from lawyers all over the U.S. with complaints that Adult Protective Services are not taking financial elder abuse seriously enough in many places. When it is reported, APS may dismiss it as “a civil matter” in which they have no interest. APS is essentially an investigative help to the criminal justice system. It can intervene when an elder is in physical danger. Social workers and investigators from APS look into reports of abuse and help the DA determine whether there is evidence sufficient to prosecute a crime. If the matter involves the undue influence of a family member and the elder seems willing to give away money, even if duped into doing so, APS is unlikely to take any action.
Financial advisors must not rely on the idea that APS will protect their clients when abuse is suspected. Particularly in the case of family, close associates, and caregivers, APS may not wish to interfere unless or until an obvious crime has been committed. If is it not so obvious, it is up to others to take action to stop abuse. These others can include financial advisors, who may be in a highly trusted position with the elder. Advisors will see unusual withdrawals in the account or other signs of danger.
The financial services industry, generally, has avoided certain kinds of communication with family of aging investors due to privacy laws, concerns which they interpret as precluding them from sharing financial information. I do not agree that privacy should stop advisors from communication with family when an elder clearly needs protective action. There is a way around the privacy question. Policy can be created to obtain from every client a signed permission to communicate with a family member or trusted other appointed to step in when the advisor (and her compliance department or officer) has reasonably concluded that the elder is being taken advantage of financially or otherwise.
In his article, Paul Hynes suggests that wealth advisors should follow the notion “if you see something, say something” and I wholeheartedly agree. However, the industry needs to develop new, forward looking, senior specific policies to address what Hynes correctly points out as the rampant problem of elder abuse.
I’m doing my part to help by developing educational materials (Including books and online courses) for industry professionals to recognize the red flags warning of potential abuse, diminished financial capacity and how to get the necessary document in place around the issue of privacy by obtaining a client’s permission to communicate with others. Aging expertise from outside the financial services field is needed for all of these points. I hope everyone in the industry will pursue what FINRA (Financial Industry Regulatory Authority) has suggested since 2008: that advisors put senior-specific policies in place to assist them in stemming the rising tide of elder financial abuse of their own aging clients.