Three Tips For Talking To Your Older Clients About Long Term Care
When you look at an older client’s portfolio, the biggest concern is probably about whether they have enough to last to the end. You calculate the drawdown, the earnings, and you spend time on those figures. But what about long term care?
This is the conversation the client doesn’t want to have. No one wants to think about being disabled or losing independence.
Of course, this is not realistic. You, the planner may not want to bring up the subject because of your own discomfort, or because you aren’t sure what to say, or perhaps because your client dismisses it if you do bring it up. But a competent planner and advisor must do so.
Consider this realistic typical scenario:
A health crisis happens to your client. It can be a fall, a stroke or heart attack, anything that is unexpected. First, there is a hospitalization. OK, Medicare covers that, together with supplemental insurance. A rehab facility is next with therapy and nursing care. Medicare covers that but only to a point. When the elder is ready for discharge, the client and family are told, sometimes a day or two beforehand, that they will have to get help for the aging loved one at home. ”Doesn’t Medicare cover that?” they ask. Unfortunately, no, they are told.
The Cost
So the family members and the client start scrambling to provide help at home. In some parts of the country the cost is about $30 per hour. According to the Genworth 2015 Cost of Care study, the national median price for someone to provide help with bathing, dressing and walking or other hands-on home help is $20/hour.
When you do the math, you realize that even if your client needs just twenty hours a week at the average cost, it will add up to nearly $20,000 a year. That is on top of other, non-covered medical expenses, such as physical therapy when Medicare stops paying, hearing aids, and many medications. And that is just the beginning. Limited hours of home care often stretch into full time care as people who have disabling conditions age.
Some people figure they can spend their assets and give things away so they can qualify for Medicaid. I would not recommend Medicaid as the best way to get quality care. First, one must be really destitute to qualify for it. And the state looks back at all financial transactions for a five year period in most states prior to the application to see what was going on, what transfers were made and if they were honestly done. Second, the care one receives under Medicaid is the most basic, may be of the lowest quality and typically is not what anyone really wants.
If you can prevent that choice, you will. Your client could spend her last days in a three bed room in a dingy nursing home if she or anyone in her life thinks Medicaid is a fine way to pay for care.
The cost for quality care at home can be staggering. In my own prosperous county, with a very high elder population, the cost of 24/7 care at home from non-nursing providers (home care workers) exceeds $200,000 per year. That is on top of the ordinary costs of living a senior has, regardless of care. And she will still be paying her out of pocket costs for other things Medicare does not cover: many medications, other non-covered services, Medicare premiums, etc.
Taking On The Long Term Care Discussion: Three things you should do
You need to create a plan for how to pay for long term care in the future as part of your job of financial planning and retirement planning. Your client is not likely to ask you about it. Do not wait to have these discussions. Cash for the unexpected need for care could be a major expense. Your client needs to know the facts and figures. Most people grossly underestimate the costs. We have even seen financial industry publications naively state “Medicare pays for most things”. It doesn’t pay for what most people need to stay at home after any disabling condition arises.
Educate your client about the likelihood of this need for future care.About 70% of people will need long term care in some form in their futures. Failure to plan for it can bankrupt a person or leave them in serious debt toward the end of life. Or some investments could make cash inaccessible when needed.
Use resources to help yourself understand the real costs of home care, assisted living, and nursing home care. In order to educate your client, you need to educate yourself first. The Genworth Cost of Care study is a good resource. Here at AgingInvestor.com, we also offer tools[1] to help you. Be sure you have something to hand to and to discuss with your client. The need is now for any retiree.
by Carolyn Rosenblatt, RN, Elder Law Attorney & Dr. Mikol Davis, Geriatric Psychologist
[1]The Family Guide to Aging Parents: Answers to Your Legal, Healthcare and Financial Questions, and Succeed With Senior Clients: A Financial Advisor’s Guide To Best Practices and Working With Aging Clients, A Guide for Legal, Business and Financial Professionals. All 3 books are available at AgingInvestor.com and Amazon.com
Do you consider yourself to be pretty good at managing your older clients?
Most of us may be overestimating what we know and underestimating what we need to know. By the year 2020 nearly one in six Americans will be sixty years old or older. And 10,000 people a day are turning seventy.
If you’re thinking “so what?” consider this: the risk of dementia and Alzheimer’s disease rises with age and the risk doubles about every five years once a person hits sixty-five. So you the advisor, the financial professional with responsibility about another’s finances will have to deal with the risk. Some of your clients are impaired now whether you recognize it or not, and many of you have several clients with some cognitive impairment.
Do you know what to look for with your older investors? Do you know the red flags? And if you spot those red flags, do you know what to do about them? There can be a long list of signs showing that a person is beginning a downhill slide with her thinking and understanding. Let’s just start with one sign most of us can recognize: short term memory loss.
The First Red Flag
Researchers who study these issues tell us that this is one of the very first signs other people see when the older client (or anyone) is starting to lose the capacity to make safe financial decisions. The client may entirely forget a conversation he had with you last week or even the same day. The client may forget her appointment with you or that she had a question she needed answered. By the time you get back to her with the answer, she doesn’t recall asking it. There are innumerable examples of this in our lives, as grandparents, other older relatives and friends start becoming forgetful. When it happens with clients, it is a red flag that warns you something is happening that needs your attention. Why?
The signs of forgetfulness can indicate that you need to track your client more closely than before. That means increasing the frequency of contact, especially in person if possible. Memory loss may lead to dementia, though this is not true in every case. However, memory loss is listed by the Alzheimer’s Association as an early warning sign of Alzheimer’s disease. Clients who have this disease should not be making financial decisions without the assistance of a trusted other. It is far too dangerous for them, as their judgment is impaired.
Documentation
No one will know what you see in your client unless you keep good records of your client contact and your observations. You need to label the changes you see in a uniform way, as should everyone else in your office. Call things by the same terms so everyone understands what is going on. “Short term memory loss” is a good example. This is a term that is in widespread use and typically understood by just about anyone. If you document that, and then see a client six months later, noting that the problem is worse than at the prior contact, you and those who may advise you about what to do will have something solid to work with in making decisions about that client. When you document, give specific examples, such as “client called repeatedly the same day asking the same questions”. And comment that he appeared to forget the previous conversations about that subject.
Then What?
After you have spotted such red flags as memory loss, you need a plan for escalation of the matter to someone who knows more about elder issues than you do. That needs to be a firm-wide or office policy. The decision-makers on the subject of what to do to keep an impaired client safer need to have a solid working knowledge of what steps they can take with you to help your client and protect your organization from costly mistakes.
Red flags of diminishing capacity are things every financial professional must learn and understand. We don’t cover the topic deeply in this article of course, but we do take a deeper dive in the book, Succeed With Senior Clients: A Financial Advisor’s Guide to Best Practices. You’ll find all you need to know in the chapter entitled “Know the Client Red Flags”. It comes with a checklist you can use as a guide on what to look for and the right terminology to document your observations correctly. If you want a “cheat sheet” with the red flags on it, just go to AgingInvestor.com and download your free checklist any time. You can get the book by clicking here.
By Carolyn Rosenblatt, RN, Attorney, & Dr. Mikol Davis, AgingInvestor.com
Are you considering the issue of Boomers having to care for their aging loved ones in retirement? You’ve probably done a good job with helping clients be ready for retirement age, but every financial professional needs to consider a massive problem we now face. Our oldest old are living longer than anyone expected and they can run out of resources. Their adult children might have to care for, pay for or take in their aging parents.
Years before, the parent probably extracted a vow from the adult child your client, (typically a daughter) “promise you’ll never put me in one of those homes”. And the daughter, without much thought replied, “Of course Mom. I’d never do that”. How time changes things.
The concept of “being put in a home” is vague, based on largely outdated notions our elders have of ugly warehouses for the poor, something conjured not just out of an English novel, but out of the way things once actually were in some places, long before Medicare and Medicaid existed to ensure at least some care for our elders. We did neglect older impoverished people and place them in poorly regulated homes.
Things are supposed to be better now, with the rise of public benefits, and government regulations over skilled nursing facilities, all designed to keep residents safe and in a somewhat dignified existence. The intended outcome of these regulations does not always meet reality. The cost of caregiving for all but the lowest income in our society is borne by the elders themselves if they have the funds or by their families if the parent has limited means. .
Advisors may discuss with retirement-age clients that Medicare doesn’t cover all the costs of medical treatment that clients themselves may need as they age. But few advisors have the foresight to ask their clients if they anticipate also having to pay the cost of care and out of pocket medical expenses for their parents too.
We have a 94 year old mother in law. She’s in decent health, and has the means to cover what she needs now and in the future. We’re among the fortunate ones. Years ago, we and my husband’s parents made a joint investment that pays enough income for her, now widowed, to live on. She can cover health emergencies, home care, expensive medications and whatever downturns her health may bring. She has savings as well. This is not how it works for the average person in our country. Perhaps your clients are wealthy but their parents might not be.
Some folks solve the issue of what to do by bringing the aging parent into their homes and providing or paying for care themselves. This multi-generation household approach is a cost effective way to house an aging parent with limited resources and cover many expenses that would otherwise have to be borne by the elder who just might be low income by the time they reach the age of 94, like she did in my family.
Bringing in the aging parent to live with you is not a solution for everyone, but one worth considering. If you broach the subject with your Boomer clients, you can get them thinking about this. Longevity is increasing steadily and it is going to affect those whose parents live longer than anyone thought they would. The takeaway here is for you, the financial professional to ask them about it.
Here are some basic questions you should ask:
“Do you anticipate having to pay for support for anyone else during your retirement years? Are your parents living? How is their health these days? What would you do if they got low on funds and needed care? Have you thought about what it would cost to care for them?”
Learn more about how your clients need to discuss finances with their own aging family members at AgingInvestor.com in Succeed With Senior Clients, A Financial Advisor’s Guide to Best Practices. You’ll be doing a great service and prudent planning when you initiate the discussion they need to have.
The National Institute on Aging reports that scientists are using magnetic resonance imaging (MRI) of the brain to explore the parts associated with money managing abilities. Can we actually see a picture of this?
The report cites neuropsychologist and lawyer, Dr. Marson. “It’s the $18.1 trillion problem,” said Daniel Marson, J.D., Ph.D., professor of neurology at the University of Alabama at Birmingham, citing an estimate of household wealth held by U.S. adults age 65 and older. “That money is at risk in part because of the cognitive disorders of aging.”
We don’t have a way to pinpoint an exact spot in the brain that would tell us that a person is or is not competent with finances, but the report describes novel efforts using MRIs to find out more than ever about the brain and financial capacity. Changes in certain parts of the brain are linked to loss of financial capacity.
New techniques are providing intriguing data on why older adults—even those who were previously quite savvy about finances—may lose their money-managing abilities,” said Nina Silverberg, Ph.D., program director of the Alzheimer’s Disease Centers at NIA’s Division of Neuroscience.
What does this mean for you and your aging client? It may be one more objective way to verify what you already suspect: that an older client is not savvy anymore when it comes to handling finances. The trick would be persuading a client to get this brain image if you and the family suspect that the client is in cognitive decline. We don’t have the MRI techniques nailed down to verify loss of money making decisions, but that seems to be on the horizon.
Meanwhile, every advisor needs to be aware of the subtle signs of impairment in your client. An aging client who is in the earliest stages of Alzheimer’s for example, is already moderately impaired for making safe money decisions. That means that you, a responsible advisor have in place a clear path to bringing in a surrogate decision maker to help that client. Part of that $1.8 trillion Dr. Marson mentions as being at risk is what is paying your fees. Take prudent steps to protect it.
Learn fast about spotting diminished capacity with our downloadable free checklist at AgingInvestor.com.
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Carolyn L. Rosenblatt, is a nurse and elder law attorney, along with blogging for Forbes.com and author of 4 books on aging. She is a co-founder of AgingInvestor.com and AgingParents.com
The Fraud Watch Network sent out a press release detailing a new and fast moving telephone scam targeting taxpayers across the country. As many of us are aware, our aging loved ones are quick to fall for these phone scams. Thousands of victims have already lost more than $1million. Please caution your aging parents and others as well.
Here’s how it works:
Fake IRS agents call taxpayers, claim they owe taxes, and pressure them with demands for payment using a prepaid debit card or a wire transfer. They threaten their targets with arrest, deportation or loss of a business or driver’s license, said J. Russell George, Treasury inspector general for tax administration.
The fake agents mask their caller ID, making it look like the call is coming from the IRS. In some cases, even more frightening, fake agents know the last four digits of Social Security numbers. They go so far as to follow up their targets with official-looking emails.
The reports about the scam describe how immigrants were targeted first, and threats of deportation were very effective. It has since spread to thousands of other victims in most states.
Imagine your aging parent getting one of these calls. Unsuspecting, intimidated and wanting to comply. You, as the adult child with more of a fraud antenna might wonder why a supposed IRS agent would call you, as the IRS always communicates with a taxpayer via mail. Your aging loved one might not think of that. When a second call comes in, once again with caller ID masked and faked to look like the police department or the Department of Motor Vehicles, it looks even more like the threat of consequences for not paying is real.
What if your parent really does owe back taxes? They can call the IRS directly at 1-800-829-1040 and get the truth. The IRS never demands wire transfers or debit card payments nor do they use license suspension or deportation as a threat.
Most of us understand that when someone demands payment over the phone by wire transfer or debit card that you should simply hang up. But not everyone knows this, particularly the 20,000 or so people who have been tricked so far with just this scheme.
So, keep your loved ones safe, especially your elderly family members. Warn them about this latest scam and follow up with questions as to whether they have gotten any calls like the ones described here, from anyone posing as an IRS agent. These scams escalate around tax time.
In consulting with families who have elderly loved ones as we do here at AgingParents.com, we often find that adult children want to believe that their parents are still competent and that such a thing could never happen to them because their parents are intelligent, or well educated, or they had work experience in finance, etc. But these clever scum with the fake IRS calls can probably fool even a smart, well educated person because the scheme gets past “filters” like caller ID and knowing the last digits of a person’s Social Security number. This is too scary to ignore.
Not only am I going to warn my 91 year old mother in law about this, but I’m going to ask her to tell all her friends at the seniors’ community where she lives. I’ll let my own adult kids know about this scam too. I hope you will do the same.
Most of us probably think we know what to look for in an aging client who has diminished capacity. But have you every studied the subtle signs that should serve as red flags for you? Now is the time to learn more. Too many older clients are among us to ignore the probability that some of them will be too impaired to do business safely.
Indicators of diminished capacity will not always be so obvious to you, particularly if you are interacting with a an aging client and you as a professional are doing most of the talking. You are probably directing the conversation with that client If you have specific questions about a transaction, whether it involves a real estate matter, a legal transaction or case or accounting matter. You could miss the signs that your client is beginning to develop cognitive problems. If you are asking your client, “Do you understand?” and he says “yes” that is not a way to test whether he really did understand or not. You will need to do more if any warning sign pops up when you interact with your client.
There are so many scams popping up in our world, it’s hard to keep track of them. The scammers target specific groups, such as older people or people who speak Spanish or anyone they hope to fool. Every professional can be instrumental in helping stop the scammers.
The Department of Justice and the Federal Trade Commission have joined forces to help educate the public. They’ve put out these four tips to pass on to every client, whether you believe they are in a vulnerable targeted group or not. (more…)
A judge agreed with Fireman’s Fund insurance company’s retirees who sued the employer for introducing them to “financial education seminars”. They attended, followed the advice given and lost everything. Maybe you thought this only happened to naive older folks preyed on by slick salesmen outside the workplace. But no. It happened to 34 long time employees and retirees of Fireman’s Fund who lost most or all of their retirement savings by being misled into risky investments.
Doesn’t every professional want to stand out from the crowd? Be better at delivering services? Somehow get a reputation as a cut above the average guy or gal in the biz?
It’s hard to sell the idea that you give better service when you are doing essentially what your competitors do in the same space. The secret is in offering a different service from the others in your field, besides the usual expertise in your field clients have a right to expect use the best essay editor source.
What will that different service be? If you want to focus on senior safety, that can be it. We don’t mean that you know about the things seniors need to know about, such as retirement strategy, estate planning, moving, wealth preservation, tax planning and all that. It will be about specifically protecting them from abuse.To do that, you’ll need a senior-specific policy that spells out how you can protect a client. (more…)
Your elderly clients are exactly what professional thieves are looking for. They know, from the massive success they’ve had in stealing from elders, that age is the biggest risk elders have that can affect their money judgment.
But as a professional, is it really your business to keep them safe from outside predators? It’s one thing if the person taking advantage is in your own organization or office. That puts an obvious burden on you to act. But it’s the subtle things that you learn from your client about losing money to someone that should get your attention too.
Have you ever had an older client who didn’t want anyone, not even family, to know what his assets were? Did you find this secrecy about money to be a problem with a few of these older folks? It’s not so rare.
Everyone is entitled to privacy, of course, and the rules mandate that you not share a person’s private financial information. But what if your client begins to decline in his health? What if he starts to appear as if he’s “losing it”? Then are you supposed to just let him make mistakes and feel constrained that you can’t call a family member or anyone about his health? It does seem that most advisors do nothing until things reach a crisis point.
As aging experts, we think things should be handled differently. When you open every client file, you are not required to get the name of someone to call in case of emergency or in case of need. That is precisely what needs to change. Let’s consider common sense. If people are living longer than ever, their chances of developing cognitive impairment are consequently greater. With impairment, people lose their financial judgment. If you have a client’s trusted contact in the file, you may need it. And you can’t wait until your client is really, obviously impaired. If you do, she probably won’t want to give you anything. That puts you in a bad position. Your client is vulnerable to big mistakes and even to financial abuse. You don’t know what to do. You can’t call anyone and you wouldn’t know who to call even if you could.
Here’s the sensible solution: get the names and contact information of two trusted others for your client when you open any file. And with existing clients, ask them for the contact for two trusted people in their lives at the next portfolio review. Do it across the board for every single client. That way, when any one of them goes on to develop cognitive impairment, or dementia or has a stroke or anything disabling, you are not caught flat. And how do you ask that secretive client for the names and for permission to call when, in your judgment, the need arises? You start by making it your problem. You let the client know that it is now office policy. You politely insist and you get it done.
Not every single client will immediately cooperate. Some will need your patient persuasion and tact to coax them to do this. That is one of those “soft skills‘ you absolutely need with your older clients. A few may refuse your request and you can’t force it on them. But for most clients, the encouragement from you to look to the future may be considered part of your job.
Howard, 92, loves women. He has dementia and is legally blind. He likes to give women checks when they tell him their sob stories about needing money. He has one daughter, Missy, who is aghast at his conduct.
After her mother died, Missy felt obligated to try to keep Dad from throwing away all his money. He would use up everything in the checking account and then use credit cards to the max. He got into debt. Missy warned him and warned him, but he just didn’t get it. She had no legal authority to stop him from his stupid decisions about money.
He got a housekeeper, Flossie, recommended by the manager of his building. Flossie didn’t have much money, and needed to get her car fixed. She hit up Howard and wrote herself a large check from his account, which she had him sign.
When Missy confronted him about giving Flossie money, he lashed out and tried to hit her. He had a history of violence and Missy was fearful as well as very angry. Dad had given away cash to five other women before Flossie!
Finally, Missy was able to get the checkbook away from dad and no one else could write checks for this blind man to sign. He was now out of money. She had not taken legal steps to do this before he was broke. Not smart.
Flossie decided she was “in love” with Howard. She assured his daughter that she just wanted to be with him but they weren’t going to get married. Then Howard took a fall, was hospitalized and soon after, went to a nursing home. Flossie kept hanging around. One day, she went down to City Hall and got a marriage license. She never told Missy. She found an officiant for marrying them and had the ceremony right there in the nursing home.
Missy was beyond furious. She had reported Flossie to Adult Protective Services. The worker told her that Howard was “entitled to his folly”. She thought that was just plain stupid. She was advised that she could go to court and get a guardianship over her Dad. But, he had no money left and it seemed pointless by then. It was going to cost thousands of dollars too.
She sought advice at AgingParents.com. Mediation of the dispute with Flossie was suggested. Missy and Flossie both agreed to talk over the problem.
Missy wanted to have the marriage annulled. She wanted Flossie to be able to visit Howard, as he did seem to like her company and he was lonely. Missy and her husband had a suspicious and mistrusting relationship with Flossie, but in a way she was actually helping them by keeping Howard company while they were at work. Flossie didn’t want an annulment. She liked the idea of being married. Apparently, she didn’t consider Howard’s credit card debt. She just wanted to get something from Howard, like his Social Security survivor’s benefits.
The dispute was mediated without involving lawyers or the court. Missy proposed that she would allow Flossie to continue to visit Howard as she wanted. But, she was to refrain from discussing money and would report to Missy. When Missy asked Flossie if she was going to pay her Dad’s credit card bills, Flossie blanched. Suddenly, she seemed a lot more interested in the annulment.
She agreed to Missy’s conditions. A deal was worked out between them with the mediator’s help. Flossie agreed not to tell Howard about the annulment. He had been declared incompetent long before, and would forget what it meant anyway. Flossie agreed to the legal annulment. In exchange, Missy and her husband agreed to attend a “marriage” ceremony between Flossie and Howard at Missy’s home, without any paperwork, without it being legally recognized, and Howard would be none the wiser. Flossie could play married, without any legal consequences good or bad. Howard would still have Flossie’s companionship and Missy was okay with that.
The resolution gave everyone at least some of what they wanted. Before it got as far as it did, however, Missy might have tried other options.
By the second or third time a woman had ripped Howard off, she might have worked on persuading him to give her a Durable Power of Attorney for finances. She could have moved funds out of his checking account and stopped the ripoffs by his “girlfriends”. He eventually did sign one, but it was too late to keep his funds in the bank when he did.
She also could have gone to court for that guardianship. His doctors were cooperative in declaring him incompetent to handle money. Guardianship was a last resort, but it would have protected him. He ended up on Medicaid, in a 3 bed room in a mediocre nursing home. He will likely stay there for the rest of his days. Guess that’s how it works when one is “entitled to his folly”.
I’m hoping that anyone with an aging parent who is like Howard will look ahead. Sometimes, your aging parent makes a string of stupid decisions and you can’t stop them. But sometimes you can stop the folly before it’s too late. If you don’t know what to do, seek some outside advice.
And yet, these elders seem so oblivious. If you point out logically that they’ve forgotten the earlier phone call, there will either be an embarrassed excuse or a denial. Even if you read her your notes of the earlier phone call you both had and that the question was answered, she will not going to accept that and she might get very angry with you for suggesting that she isn’t fine. Why is this? Why can’t a person who is forgetful just say it and admit it? Are they being purposely difficult?
The best way to handle an aging client with memory loss is to make use of that permission your client gave you to contact a third party to contact (often an adult child) so you can discuss the problem and then take protective action.
But, I don’t have permission to contact a third party, you say? Now that’s a significant problem. Here at AgingInvestor.com, we urge every advisor anywhere and in any setting to first have a policy to guide you in the event that a client develops memory loss or dementia at any time. As a part of that policy, you will have a special document that allows the client to make a choice of what will happen if you see cognitive impairment or diminished capacity at some point in the future with that client. In that same document, the client waives the usual right to privacy over their financial information, and allows you to share it with the person they appoint. That will help you do the right thing.
For any advisor, lawyer, real estate professional or insurance broker, the same applies. If you don’t have a senior-specific policy in place, you need to develop one. If you don’t have a special form to use with clients in which you ask them to appoint a third party you can contact in the event you observe diminished capacity in your client and at the same time have them waive confidentiality if the time comes, you need to do this now. If you aren’t sure how to go about developing a senior-specific policy, we understand. It’s a little complicated and you need guidelines and a format.
We have just the thing for you. We have created a Ten Step Policy Development Template, complete with forms and instruction in how to create a great policy at AgingInvestor.com. Get yours and you will be ready to go in a very short time. We’ve taken the guesswork out of the equation and that will save you time and money. It’s almost done for you. Your particular goals will be met.
Do you supervise anyone in your office or firm? Beware of supervision over improper mutual fund switching, especially with older clients.
FINRA Rule 3110(a) requires each member to “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.”
An individual supervisor may be held liable under Rule 3110(a) for failure to provide reasonable supervision. When a supervisor is charged with a failure to supervise, it’s because of not acting on the red flags the examiners felt were evidence of wrongdoing. Those red flags could include switching to up-front sales loads with a number of elder investors and unusually high commissions that result. When this happens with a number of older clients, it will alert them to scrutinize you more closely.
If older clients have shown signs of diminished capacity and this sort of switching is going on, it is asking for trouble from FINRA. This agency is focused on a lot of compliance issues but they are particularly interested in anything that appears to be taking unfair advantage of seniors. They want you to understand diminished capacity and to be able to identify the warning signs. Every supervisor should know this information well.
One of FINRA’s persistent recommendations matches the stated goals of both the SEC and NASAA as well: it is that you keep your aging clients safer. Given that shared regulatory mission, it is understandable that they are looking for places to hold you accountable in your transactions with seniors.
To learn more about diminished capacity, the red flags and what you can do when you spot them, take advantage of an opportunity to get a quick online primer at your convenience. AgingInvestor.com offers Best Practices for Managing Clients With Diminished Capacity.
Is financial abuse happening to YOUR clients right now? Of course it is. There is no escaping it. A recent study puts the amount stolen from elders every year in our country at over $36B. With a problem as big as this, no group of elders is immune.. If you took a survey of your existing clients all age 65 or older, and asked them how many have ever been taken advantage of financially, you would be sure to get some clients who would admit to this. If you look at your own experience and count up any instance you know of, whether it is in your family, your neighborhood or your book of business, you will likely find some financial abuse as well.
Why Is This Important for You?
The amounts stolen, fraudulently taken or just snatched from the unwary, are shocking. Remember that when your client loses assets, you lose fees. That is the most basic reason this should be important to you as a financial professional. Doing the right thing to keep your clients safe is certainly a motivator as well. It shows that you do care about them. And beyond that, the regulators are increasingly aware that financial professionals are in a position to take action and, sometimes, to stop and prevent financial abuse. They will soon get past merely urging you to take action and to report abuse. They will ultimately make it mandatory.
And we think you can do more proactively than merely to understand how to report abuse after the fact. It would be great to catch more criminals but that is extremely difficult in many cases because they are very clever at evading law enforcement. And since family members are the most frequent abusers, we have an added problem in that many elders are reluctant to report abuse by their own to law enforcement. Mom just won’t call Adult Protective Services on her son, even when she knows he has stolen from her. We have seen this with our own eyes There are many instances of scammers getting into relationships with aging folks by phone or on the internet. The “friendly” relationships become addictive. These thieves persuade the victim to withdraw funds from their accounts. This is where the advisor comes in. Unusual withdrawals are an important warning sign of elder abuse. And when the advisor notices this in a client’s account there are choices available about stopping abuse. They include contacting a trusted other the elder has identified and warning them of what is happening. There should be more than one trusted person identified for every client. And by all means, contact Adult Protective Services and report it if you suspect fraud.
If you are worried about privacy rules, don’t be. The regulators of your industry want you to report abuse. They want you to make every effort to keep aging clients financially safer. If you are not sure about privacy, we can help you create a special privacy document here at AgingInvestor.com that gives you permission to call that third party. Every advisor with any client over age 65 should have this and understand how to approach a client about signing it. With permission like this, you should never hesitate to tell APS and the trusted other that you are concerned about your client being financially manipulated.
You can get more details about this elder abuse issue and what you can do as an advisor in Succeed With Senior Clients: A Financial Advisor’s Guide to Best Practices. See particularly the chapter “Financial Elder Abuse: How You Can Fight the Crime of the Century“. It’s available right now so click HERE to get your copy today.
Many older people have a bit of difficulty remembering. We often dismiss this when we see it in a client, thinking it’s “just getting old”. It may be part of aging, as we do process things more slowly as we age and recall may take longer. But, there is a point when a problem recalling things should be a red flag for diminished capacity for you, the advisor.
What are those red flags anyway? How do we label them?
There are numerous signs of diminished capacity, more extensive than this article allows, but we’ll look at one category, which we call cognitive signs. Here’s a breakdown of what you should look for when your client has a lot of difficulty remembering things.
What to note and document about memory loss
This is one of the first things most advisors may notice in a client that causes concern. Perhaps she does not remember important meetings, decisions and discussions. Here are some examples of what you may see:
Multiple telephone calls in one day that are repetitive and do not make sense. The client forgets that she has already talked with you and is calling about the same thing in another call to you. She repeats a question she already asked you and that you already answered.
Client forgets why he has an appointment with you. This can be by telephone or in person. Perhaps the client himself asked for the meeting but then he forgets why. Or perhaps you wanted to discuss a proposed transaction with him and told him that, but when you call or he comes into your office, he has no idea why he is there. Trying to refresh his memory about it does not help.
Complete forgetting of an event that just took place. You just spent a hour with your client telling her some important information about upcoming changes to her portfolio. She seemed to understand when you were talking but an hour later she asks you questions as if the meeting you just had never took place. She had totally forgotten about it.
No shows.
You have arranged meetings, appointments with others or events that require your client’s participation. He agrees on the pre-arranged date and time but then does not show up. When you call him, he has no recollection of the event, that others are involved nor that he had agreed to this.
If your client demonstrates any of these indicators you need to be paying close attention and make an effort to contact your client more often than you did before you noticed these problems. Any or all of them might be warnings of developing dementia. The only way to determine if you have a serious problem here is to track these signs over time and keep good records of it.
If the problem gets worse, it is time to take it to the next level. In your organization that might mean escalation, or having the documentation reviewed by a committee. Ideally, as we see it, the next step should include contacting the client’s appointed trusted third party who would step in when the client became impaired.
To learn more about the other red flags for diminished capacity in your clients and how to document them, get a copy of Succeed With Senior Clients, A Financial Advisor’s Guide to Best Practices. See the chapter “Know Your Aging Client’s Red Flags”. It comes with an easy to use checklist you can put to work right away. Click HERE for your book!
By Carolyn Rosenblatt, RN, Elder law attorney
AgingInvestor.com
<div class="signature"> <table style="border: 2px solid #999; border-style: solid; background-color: #f5fff5;"> <tbody> <tr> <td style="width: 110px; vertical-align: text-top; align-content: center;"> <div style="border: 1px solid #eee;"><img class="alignleft" src="https://www.aginginvestor.com/wp-content/uploads/2015/04/DavisRosenblattPublicityPhoto.jpg" alt="" width="123" height="116" /></div></td> <td> <h4>Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com</h4> Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too. Dr. Mikol Davis, Psychologist, Gerontologist offers depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients. <a href="https://www.aginginvestor.com" target="_blank">AgingInvestors.com</a> offers accredited cutting edge on-line continuing education courses for financial professionals wanting to expand their expertise in best practices for their aging clients. To learn more about our courses click <a href="https://agingparents.leadpages.co/ceu-choices/" target="_blank">HERE</a></td> </tr> </tbody> </table> <table><script src="https://agingparents.leadpages.net/leadbox-856.js" type="text/javascript" data-leadbox="1458b05f3f72a2:160053496b46dc" data-url="https://agingparents.leadpages.net/leadbox/1458b05f3f72a2%3A160053496b46dc/5663812699029504/" data-config="%7B%7D">// <![CDATA[ // ]]></script></table> </div>
Diminished capacity is sort of a catchall term that can mean different things. A person can have the capacity, for example to create a will or a trust, but at the same time that person might not have the capacity to understand the risks of buying a complex financial investment. Capacity is on a continuum. The more sophisticated the decision needed the more capacity it takes. The dividing line between impaired and unimpaired is not clear.
Is there any way to measure capacity? We have a number of things in the medical field that help give us clues and data, but there is no one, single thing that tells us for sure. We can’t see inside a person’s thoughts. What we do have is testing of the various areas of the brain, with standardized instruments that give us information about how a person thinks. We call it neuropsychological testing.
What is neuropsychological testing?
Neuropsychological testing (using groups of related paper and pencil and verbal question and answer tests) can provide useful information to take the question of capacity outside the realm of speculation. Test data provides numbers, scores, something specific.
This kind of testing can give useful information about which tested parts of a person’s cognitive function do or do not compare normally with the tested function of people of similar age and education.. When a person falls below a measure of what is normal, and we have test scores to tell us where and how, it can give us guidance about whether to allow a person to keep making financial decisions.
Testing is underused in helping us find out about a person’s mental capacity for numerous kinds of things, such as memory, following verbal instructions, understanding information and learning a new task. Not enough families know about it and request it and not enough others refer clients to the right source for considering it as a tool to give us more information. Perhaps older people resist it out of fear not “passing the test”. If clients secretly know that they are losing their memory and do not want to be found out, they will strongly resist any suggestion of testing.
What can the advisor do?
If you are worried about a client who seems to be “losing it” and you aren’t sure you have enough information about that, you can suggest that the client get a medical checkup, and that he ask the doctor to check into his memory. This is not a sure path to neuropsychological testing, to be sure. Unfortunately, doctors spend very little time with patients these days and a brief visit may not result in the follow up testing you would like to have done. But in some cases, clients are willing, particularly when encouraged to do so by a concerned spouse or other family member. In spite of obstacles, know that this objective way of measuring things does exist and it can help everyone involved in the senior’s life.
Want to learn more about best practices for clients with diminished capacity? Know the red flags and feel confident about what to look for.
Aging clients are an inevitable part of the landscape these days. People are living longer than ever. That’s great, but age brings risks to one’s mental capacity. And those risks put a burden on you the business professional to be aware of where to draw the line. When is it just not safe to rely on what an older client tells you to do?
Bear in mind that by age 85 one in three people will have Alzheimer’s Disease. This brain-destroying and progressive condition comes on slowly in most folks and begins to take its toll of judgment about financial matters quite early in the disease process. The person might seem perfectly fine in social discourse. That is not a guarantee of financial capacity.
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.
Industry regulators are always coming out with recommendations. And those have a way of eventually becoming mandates. When it comes to seniors, the regulators are very concerned about financial professionals keeping aging clients safer financially. We’re not talking about the DOL rule here. We’re talking about a lot of other recommendations they’ve made. One of these is increased communication with your older clients, 65+. What’s the big deal? These clients are more at risk of financial abuse from every direction. Regulators want you to do what you can to protect senior investors.
Here are two ways they suggest you do that.
First, increase the frequency of your communication with these older clients. That means reviewing their portfolios more often. It means calling or writing more often. It means paying attention to what is going on in their lives that may increase their risk of being manipulated financially.
Second, discuss with your clients the issues that affect seniors. One of these issues is the possibility of becoming impaired. You can present the idea in terms of having a stroke or heart attack. That’s a lot easier a concept for an older person to swallow than the idea of becoming cognitively impaired, everyone’s great fear. So you suggest that your client be sure to have an appointed agent on a durable power of attorney.
Another important piece of the picture of improved communication with aging clients is for you to encourage them to discuss their financial affairs with their heirs. You can be the catalyst in this process. Such discussions provide a forum for you to recommend that the client appoint a trusted other to serve as agent on a durable power of attorney document. Knowing that your client has done that essential thing, you have the potential to work with the appointed person in the event that your client becomes incapacitated for any reason, including dementia.
Without a DPOA, it is generally a messy legal problem for those who must take responsibility for an impaired elder. They may have to undertake the expense of seeking a guardianship in court to even have legal permission to make a bank withdrawal or sell a stock for the elder. If you know who the appointed person is, suggest a conversation with your client and that agent. Lay the groundwork for communication, should the need arise to have the DPOA step in at a later time and act on behalf of your client.
(Incidentally, from a legal point of view there should not be a conflict in appointments of the agent on a DPOA and an appointed successor trustee for the family trust. That begs for later fights. Encourage your client to consider this!)
We are touching on just a bit of what the SEC, FINRA and NASAA have jointly recommended for you and indeed urged you to consider in working with your aging clients. They want you do to business with this population in your book differently than the way it goes with younger clients.
We all know that financial abuse and undue influence are problems with our elders. We also know that better, more frequent and clearer communication about financial matters in families can do a great deal to protect the aging family members. But they’re not talking.
We have research to reveal how much of a problem this is. What is shows is that only a minority of seniors are sharing their financial information with their kids and the adult children are finding that aging parents are reluctant to have these money conversations.
Investment News posted an article describing how the North American Securities Administrators Association has formed a new Committee on Senior Issues and Diminished Capacity, which will be headed by Montana Deputy Securities Commissioner Lynne Egan and include 13 regulators from across the country.The SEC Investor Advisory Committee has also tasked itself with what it described as an urgent need to protect retirees who are losing mental ability.
State enforcement statistics compiled by NASAA show that 34% of actions since 2008 involve senior victims.
These groups are very committed to finding out what best practices should be. The NASAA committee could develop a model rule over the next year. With over a dozen people on a committee how many of you think they’ll have rules put together anytime soon?
Admittedly, this is an urgent problem. Over $36B is stolen from elders every year, according to a recent study. You can and should be developing your own best practices right now.
The longer we wait for government or any regulatory agency to tell us what to do about elder abuse, the longer we delay acting when we see it before our eyes. It doesn’t require a government rule or a professional organization’s sanction to act with common sense on your own.
Have you ever felt frustrated when you thought your client was showing signs of declining mental status? Did you ever want to get someone else involved in financial decisions but thought you couldn’t because of privacy rules?
The average advisor has seven clients with some form of diminished capacity. Perhaps you are one of them, not comfortable with the privacy laws that restrict you from calling in someone to help when your client doesn’t seem all there anymore.
If you are worried that you must just stand by and watch a vulnerable client make bad decisions, or worse, get ripped off by someone who is manipulating him and taking advantage of his cognitive impairment, there’s good news. There is a way around the confidentiality conundrum. You need your client’s permission in advance to call that third party.
How do you plan for the possibility of needing a third party? Take your cue from lawyers. When we have a conflict that would be there unless we get an ok from our clients, we design a document that allows the client to give up the right she would otherwise have. We get the client’s signed approval do to what we need to do whenever feasible. You can do the same thing with privacy restrictions.
Imagine that you have some clients over the age of 65. Imagine that you are a proactive thinker. You want to keep all of them safe and keep those clients, even if they decline cognitively in the future. Imagine that you have been really smart and have gotten a special permission document done. Every client over age 65 signs it. You are ready!
What Should A Privacy Permission Contain?
We recommend three essential elements for your document.
First, you need to identify the circumstances under which your client wants to give you the ok to call in that third party they identify.
Second, the document needs to be legally sufficient; i.e., it should have language like an advance healthcare directive or a standard durable power of attorney.
Third, it needs to be signed and notarized by your client.
How Do You Get It Done?
Your legal department should be able to help you. If not, a model document was created by lawyers at AgingInvestor.com, in the context of a senior-specific program to protect your aging investors. You can’t just throw one together. As you have to know, recognize and document the signs of diminished capacity that would lead to use of this kind of document, those are prerequisites. Then the matter escalates according to a standard procedure. Get a clear path. Find out more about it HERE.
One broker had an $8M client take his assets elsewhere because of a fatal communication mistake. Could it happen to you?
An adult daughter of a broker’s client approached the broker about her father’s recent diagnosis of Alzheimer’s Disease. She asked for his help. He shrugged his shoulders and said, “Basically, I don’t do any of that. I just manage the money”. The daughter was upset, as her father was losing his memory and put his finances at risk. The broker did not wish to get involved with that problem.
Of course, that was the end of his managing the $8M worth of assets.
This situation, having to face a client who has been diagnosed with a brain disease or some other form of cognitive impairment is not unusual and it is becoming a much more frequent issue as our population ages. People are living longer than ever and the risk of Alzheimer’s and other age-related problems rises steadily with age. Can financial professionals just hope this issue will go away because you “only manage the money”? We think not.
The communication, the knowledge and the skill set needed to best manage your aging investors are needed, yet few are seeking to personally improve by acquiring them. How many frustrated family members of your aging clients are going to take assets away from your management because you don’t know what to do and aren’t willing to get out of your comfort zone and be a part of protecting a vulnerable elderly client?
Here are three steps you the professional in a similar situation could take to hold onto the assets, protect the client and let the family know that you care about more than just the assets.
Meet with the family and explore the extent of the impairment. If the client is still competent to sign a privacy waiver, get that done so you can communicate with the client’s appointed representative.
Educate the client’s appointee in your client’s presence about his plans for his investments and the philosophy he has demonstrated in the past. This will ensure continuation of what the impaired person wants going forward.
Set up regular family meetings going forward from the first notice of the problem. This will ease the transition of the client with Alzheimer’s disease out of the seat of power while still respecting the ability he has remaining to communicate about what he wants. It is important to empower the successor to decision making with knowledge the elder may provide while assuring the aging client that his wishes will be honored in the future.
If you are uncomfortable with the whole area of diminished capacity, you can get the skill set you need without taking too much time. Wouldn’t it be great to have more confidence about it?
Get your Fact Sheet for Financial Advisors and learn the red flags of diminished capacity and what to do about them by clicking below.
Can you think of anything that makes a person more desperate than being in pain? You can’t stand it. Maybe you’ll fall for anything that promises to end your pain.
My mother in law, Alice, at 92 was feeling like that. She had chronic knee pain that was getting worse. She went with some friends to a”free lunch seminars”, always a vehicle for selling something.
This one was put on near a large retirement community. The place is full of fairly well to do elders, some quite wealthy. Nice target, right? The perpetrator in this situation was a chiropractor. He knew exactly what he was doing, promising to end everyone’s chronic pain. All they had to do was sign up for his “guaranteed” to work pain relief program for a mere $3000 payable in advance and of course, nonrefundable. He carefully never put the guarantee in writing, but he used verbally it to seduce anyone there into believing his promise of pain relief.
Alice signed up. I advised her not to go through with his program and politely told her there were suspicious things I found in checking him out. She said she was ready to try anything and he assured her that everyone got good results. She went anyway.
The chiropractor in question didn’t even see her. His assistant did the work, which involved very brief “treatment” and a very long pressured talk to try to get her to buy his expensive supplements which they now said would enable the treatment to work. As the scam became more obvious, Alice got disgusted. The “treatment” did nothing at all for her pain. She quit and asked for her money back. No dice.
With her permission we filed a complaint with the State Chiropractic Board. which prosecutes fraud and license violations through the state Attorney General. They pursued the chiropractor, eventually settling with him. He paid a fine and was probably placed on probation. Of course none of this gets Alice her money back. At last check he’s still in business.
Pain relief is a big opportunity for scammers. They may be chiropractors or others who have some kind of license. They may be selling magic potions on the internet. It could start with one amount and escalate as it did with the chiropractor to expensive add ons, his “supplements”.
Recent research shows that many seniors who get taken for relatively small amounts of money often become victims in escalating amounts over time. They want to trust when they feel desperate and that makes them vulnerable to manipulation.
What can you do as a professional if your client is victimized by a scam? Here are three things:
If you learn about this sort of shady character, encourage your client to fight back. File a complaint. Write a letter to the entity in power. You can offer your help with paperwork or filling out a complaint form. Not every predator can be stopped but some can if you help your client take action.
Warn other older clients. If you have aging clients, warn them by letter or email about any shady operators in your area. You never know who you might be saving by doing that.
Make it public. If your client’s story is useful and you get permission to share it, local newspapers, TV or radio stations may be interested in it. That’s one way to educate and thwart these predators.
Do you have an experience of seeing a client get taken advantage of by a shady character like the chiropractor here? We’d like to hear from you. Your colleagues can also learn from you. We invite you to send us your stories. Please email me: carolyn@aginginvestor.com.
Have you ever wondered about one of your own client’s capacity for making financial decisions? Professionals who directly or indirectly sell services and products to aging people may not be clear about financial capacity. It is indeed a complex thing, and one should not underestimate how difficult it can be to make a determination about whether a client is impaired. Does the client seem “out of it” sometimes? Forgetful? Is he acting strangely? Maybe you just dismissed it if you noticed those things. You may have thought, “he’s just getting old”. Maybe you didn’t think it was any big deal. But was it? Diminished capacity may not be obvious at all. Small warning signs can be missed. And every warning sign is a clue. The clues can mount up and paint a picture. You need to be able to see it. And first you need to know what to look for in your aging clients. How do you decide whether someone has diminished capacity for financial decisions? Ultimately, the question of capacity is a legal decision, aided by lawyers, medical professionals and sometimes by judges. And lawyers also have a difficult time seeing the grey areas and the nuances of thinking that comprise financial decision-making abilities. One thing every professional working with seniors should know are the warning signs of dementia. If you see enough of these warning signs, your client is likely to be impaired in her financial judgment Excellent information for the public is available on the Alzheimer’s Association website at alz.org.Memory loss is often the first sign of dementia. There is a difference between memory loss a non-demented person experiences and the memory loss that evolves in to dementia. As an example, forgetting a person’s name is common and we usually remember the name later. (Does this ever happen to you, “it’s on the tip of my tongue, but I can’t remember right now”?) People who are developing dementia don’t remember these things later. Their short term memory is eroding steadily. They forget what was said in the middle of a sentence. They forget appointments. They don’t remember that you spoke with them yesterday. Confusion is another sign. They may forget where they are going or get lost. They may exhibit unusual behavior from what is normal for them. These are the kinds of things that tip you off that a cognitive problem is looming. A person who shows you these signs may be impaired for making safe financial decisions. Beware of drawing general conclusions about dementia or Alzheimer’s Disease from a single case with which you may have personal experience. If your client is not doing what your grandmother with Alzheimer’s did, you can’t be certain that your client does not have dementia. Have you as a financial professional had any personal experience with dementia in a family member or client? Let us know about what you did to handle the issues affecting so many. We welcome your input. Need a quick checklist to use to identify the 10 red flags of diminished capacity in your clients? Get yours now by clicking below. It’s free.Click here to get your free downloadable Checklist “The 10 Red Flags of Diminished Capacity” Dr. Mikol Davis & Carolyn Rosenblatt, R.N., Elder Law Attorney
Do you have any clients over age 65? They may not know about: the grandma scam. Although the government, local agencies and sometimes the media publicize these predatory traps for elders, somehow the word doesn’t get around fast or far enough. Here at AgingInvestor.com, we work with a lot of families who have elders and we’ve been sounding the alarm since 2007 on this one. But it persists. Intelligent people, doctors, lawyers, professionals and non professionals alike are being victimized. Anyone can be caught off guard.
A call from a young person is made to the targeted older person, often at night, after the aging person is asleep. Half awake, grandma answers the phone. ”It’s me, Grandma” the caller says. Grandma immediately falls into the trap and says “Michael, is that you?” Or any grandchild who is named instantly becomes the identity of the caller. ”Yes, it’s Michael” the scammer says quickly. He then says he’s in trouble in some named city far away or even a foreign country. He’s lost his passport, or been arrested, he’s in the hospital, he’s very sick, or some concocted tale of needing help desperately. There is pain in his voice. He says how much he loves his Grandma and please don’t tell his parents. He needs money right away for the bill or for a laywer to get him out of jail or to get a new passport, etc. Would Grandma please wire the money? The targeted victim has to act right away. But repeatedly, older gullible people are swayed by the feeling of wanting to help a grandchild in need. And they don’t take time to think.
Grandma is so concerned, she gets that cash wired to the scammer right away. She doesn’t check anything out and she doesn’t call her son or daughter, the parents of the fake grandchild. It takes a while before she realizes she’s been had. Millions of dollars are lost this way, in smaller amounts at a time. No matter how much the press reports this kind of scam, the thieves keep at it, as they know that about one in fifty calls will result in getting money from an unsuspecting person.
Why are these con artists getting away with it? Dialing for dollars all day is quicker and easier than robbing a bank and it gets better results. The con artists rarely get caught. The money, once wired, is gone forever from the victim. And due to shame and embarrassment, victims rarely report the scam artists to the police. Con men buy names from subscription lists with likely senior citizen readers or from other information brokers. Some have the ages of their targets and their addresses. Sometimes the more sophisticated ones have even researched the names of family members, so calling Grandma is more likely to sound credible. If the caller’s voice isn’t recognizable, there is always an excuse: I have a cold, I’m really sick, or anything that works to persuade Grandma it’s really her grandson.
What’s the takeaway?
Your client can be easily tricked under the right circumstances. Wanting a call from grandkids is the starting point for scammers. It triggers an emotional response to the plea for help. “I love you” is something the grandparent wants to hear and the emotional hook is the basis of the con man’s success. Warn every aging client to be aware of the scam and to ask the caller a question only a real grandchild would know: the name of a pet, a parent’s birth date or a nickname.
Financial professionals are in a unique position to educate clients about finances and how to keep from losing money. Thwarting abuse is so important! Have you ever had a client get scammed? Have you seen ripoffs from their own family members? We’d like to hear your perspective on this. Comments welcome.
Learn what you can do about elder abuse at AgingInvestor.com in a one hour accredited course. Check it out here.
There is something about memory loss that should raise a red flag when it comes to your aging clients and their investments. Are you prepared?
By 2030, there will be 72.1 million people in the U.S. over age 65, or “elders”. 7.7 million of them will have Alzheimer’s Disease (AD). This directly translates to a large number of impaired clients making or attempting to make financial transactions and decisions. Some of those transactions could be with you.
According to respected researcher, attorney and neuropsychologist at the University of Alabama, Burmingham, Dr. Daniel Marson, losing capacity for financial decisions is something we need to be ready for, as it affects a huge part of our population. The problem is growing. Financial institutions, organizations and banks need to take preventive steps to avoid financial losses and exploitation of their clients.
What are the implications for the financial services industry? Demographics and dementia demonstrate that policies need to change and institutions need to explicitly plan for diminished financial capacity in their investors. We’re not just talking about escalating a matter to compliance when a client seems to be behaving oddly. We are suggesting that institutions and organizations get over the brick wall excuse that it’s not their problem, it’s the family’s problem. Financial professionals need to change the thinking that privacy concerns prevent them at all times from doing anything unless the client gives permission. A client who is impaired for decision-making may not be willing or able to give permission for you to discuss a problem with family until it is too late. Getting permission needs to be a proactive mandate.
Privacy does not have to be a problem if your organization, institution, or you, as an individual plan for the possibility of diminished capacity as a part of all investment transactions. That planning will include obtaining a special authorization for the financial services professional to contact a designated person when certain criteria are met. That, of course, means thinking through, with the input of aging experts, the criteria that would trigger the use of the special authorization.
Further, one should develop an agreed upon plan of action for the financial professional when the criteria that demonstrate diminished capacity are identified. This will take collaboration among all the players in institutions, so that policy development is uniform, regulation-compliant, and fair to the aging person who may be developing impairment.
Most importantly, a secure path of communication and action for the institution needs to be in place. No one with a questionable aging client should be left wondering:
Should I escalate this to compliance now, or does it take more?
Do I have the authority to contact a family member, or does that violate my client’s privacy and the laws about privacy?
What steps should I take now to protect myself?
Clients with memory loss are likely going to become impaired for making financial decisions at some point. Do you want to lose the assets under your management because your aging investor can’t figure out what you are saying and can’t approve what you need to do to protect him from disaster? We see an absolute connection, based on very solid research, between the dangerous red flag of memory loss and financial loss.
If you have heard the term “sliver tsunami” you may know that it refers to the massive wave of aging folks in our population. In case you haven’t noticed, it has already hit and your feet are getting wet.
Get a one page checklist you can use to identify ten signs of diminished capacity by clicking HERE. Be ready for aging clients and know what to do!
U.S. Senator Patty Murray, U.S. Secretary of Labor Thomas Perez, and WHCOA Executive Director Nora Super discuss aging issues at WHCOA Seattle Regional Forum – Credit: white houseconferenceonaging. gov
What Is This Conference and Why Is It Important?
Every ten years the Federal government sponsors a Conference on Aging.
The relevance of this conference to financial professionals is that it identifies the most common problems aging Americans face and it provides direction for planning for seniors’ needs. It is worth reading the final report. You likely have some boomer age clients and perhaps some aging clients as well. Be aware of what is important to them and you’re likely to keep them as clients.
Who Attended the Conference?
Beginning in February 2015, WHCOA held a series of regional forums for its Conference on Aging to engage with older Americans, their families, caregivers, leaders in the aging field, and others on the key
issues affecting older Americans. The concept was to hear about seniors’ issues and plan accordingly. The series of discussions was co-sponsored by AARP and planned in coordination with the Leadership Council of Aging Organizations, a coalition of more than 70 groups,
Each forum included 200 invited guests — older Americans, family and professional caregivers, aging experts and others. These discussions took place across the country.
Reading about the subjects they discussed and the conclusions reached in the conference Final Report was not a surprise to us at AgingInvestor.com, as we are in the field. But one thing did surprise me completely: no one gave much mention to the need for thorough financial education and planning
with professional help.
There was mention of the Department of Labor’s initiative to facilitate State creation of retirement savings programs. There was also discussion of the U.S. Department of the Treasury’s recently issued guidance clarifying that employers sponsoring defined benefit pension plans generally may not offer lump
sum payments to retirees to replace their regular monthly pensions. As noted in a recent Government Accountability Office report, such lump sum payments transfer longevity risk and investment risk from employers to individual retirees, putting retirees at risk of being unable to maintain their standard
of living or outliving their assets in retirement. Wouldn’t financial advice help? No mention was made of the value of at least seeking advice from financial professionals to maintain income while investing responsibly for those who did get a lump sum payment.
The report emphasizes the need for providing lifetime income and seems to favor employers offering annuities as part of retirement planning. The Treasury and Labor Departments previously have issued
a series of guidance documents encouraging plan sponsors to offer responsible annuity options to help protect retirees from outliving their savings.
The Gap
That may work for some, but I found myself at a loss as to why mention was not made of the importance of professional guidance in financial planning, which may be the best way to ensure that an individual
does not, in fact outlive his savings. That’s your job.
Opportunity for Financial Advisors
An obvious opportunity for financial advisors is to offer financial education to members of the public. Some attendees will not have enough to make new investments, but others will. With 10,000 people turning 65 every day and the oldest boomers turning 70 now, financial advisors can play a key role in helping aging members of society do better with managing their money as they age. Advisors can improve the sometimes negative public perception of the industry by stepping up, putting on few seminars with the basics of saving and investing and capturing some new clients in the process.
Need to update your information about long term care? Get a short book that tells you how to best work with your aging clients, including planning for the costs they may worry about the most. Working With Aging Clients is a sure bet, available at AgingInvestor.com.
How well do your calculation tools work to figure out if your aging client’s money will last?
Here’s a real case where the calculations are a serious problem.
A wealthy 87 year old woman with three million dollars left in her formerly extensive portfolio needs full time care long term. Her financial advisor, together with the bank trustee managing her assets used calculation tools to figure out how to make her assets last for her lifetime. Somehow, they failed to anticipate the actual cost of caring for an elder with physical conditions and illnesses that require 24/7 care. This is a woman with advanced cardiac disease who had open heart surgery. Her daughter, who is a professional, left her self-employment to care for her mother full time.
The caregiving daughter wants some compensation from mom’s millions. She indeed deserves it.
Further, the life expectancy the trustee and advisor chose as a basis for determining how long her assets would have to last was 100 years of age. Given her medical issues, no doctor treating her would agree with that estimate. Far from it. Her heart is simply wearing out.
While cash is being drawn down monthly for her essential expenses for care at her daughter’s home, no one calculated the cost to her daughter, who is losing a six-figure income in providing the needed care. Being with her daughter is the mother’s preference. And her daughter is taking excellent care of her.
The brother, who is eager to get his “share” of an inheritance is hovering around the trustee, demanding to know how much is being spent to care for mom and why the caregiving sister should get compensation to make up for her losses, even partially. He resents his sister for asking for compensation for caregiving.
What could you, as an advisor do to prevent or mitigate family conflict like this when planning for an aging client’s future? Here are some tips:
When using tools to calculate life expectancy, take into consideration your client’s medical condition. Get real data from your client or from involved family. And update your information and calculations as age takes its toll. A person in fragile health with numerous life threatening conditions is very unlikely to live to 100.
Take into consideration that about 70% of people today will need long term care at some point. In the client’s case described above, the minimum cost of care for her is $12,000 a month. That does not include bookkeeping, a driver, nor medication management. That figure covers a full time, 24/7 non-medical home care worker only.
Assume that if your client has adult children willing to provide care, a wealthy client can and should compensate the caregiving adult child. What is “fair” should be based on market rates for service provided and the cost of what the adult child has to give up, such as quitting a job.
Calculation models may be inadequate to build in these details. The smart advisor will use good sense and knowledge of your client’s needs and preferences to adjust planned drawdowns to meet those needs.
Are you taking your client’s health care needs into consideration in forecasting the need for cash as she ages? Is this creating any problems for you in planning? We want to hear from you with any issues you have. Comments welcome!
If you want to learn more about what to do when your client develops dementia, get your one hour accredited CE online course, Best Practices With Aging Clients and start increasing your expertise today!
Watch Quick Video On How To Protect Your Clients !
This is the financial professional’s clear and straightforward map to empower you to quickly and efficiently create a new senior-specific policy.
This is important because of the avalanche of aging clients everyone encounters as our population ages. The SEC wants you to create senior policies. FINRA also urges this. You do not need to wait for them to make this mandatory. You can be forward thinking right now!
You are probably seeing some aging clients in your work now. If not, you will soon. Longevity is greater than ever in history and it is creating pressure to address such issues as diminished capacity, memory loss and dementia as never before. If you have no policy, you can feel lost or make dangerous mistakes that could leave you vulnerable to prosecution by regulators or client heirs.
The Ten Step Program Initiator will efficiently enable you to:
-Define your goal for your policy -Create the right team to build your policy -Give you the right steps -Manage the sticky issue of client privacy and give you the exact tool you need to resolve the issue of privacy versus client protection -Standardize the red flags you need to watch for with aging clients and show you how to respond systematically -Give you an alternative to protect both yourself and your organization if a resistant client refuses to sign the tool you offer to resolve the question of contacting a third party -Create a specific response to suspected financial elder abuse from outside your organization -Give you steps to follow to root out financial abuse by any bad apple within your own organization
Trying to create a senior-specific policy without aging experts is short sighted and likely to omit essential information you absolutely need to have. We offer you that expertise int the interest of protecting you as well as your vulnerable aging clients. Together, we can keep elders safer and together we can stop financial abuse.
Ten Step Program Initiator For Protecting Aging Investors is available for purchase for $995.
This Ten Step Program Initiator includes a personally signed copy of “The Family Guide To Aging Parents, Answers To Your Legal, Financial, and Healthcare Questions,” by Carolyn Rosenblatt. Your purchase also the one hour webinar “Best practice for managing clients with diminished capacity.”
This product is for single license users only. For commercial or industrial multi-user licenses, please contact us directly at 1-844-315-4464
Financial abuse of elders has been called the crime of the century. A recent study shows that it costs seniors over $36B per year in the US. Every hand is needed to prevent and stop this crime of opportunity, including the help of financial professionals. We review the nine domains of financial capacity and describe the seven warning signs that your client may be a victim of financial abuse. We suggest ways that a senior-specific policy can offer advisors a clear path to follow when client conduct puts you on notice of a diminished capacity problem. We show you “hero stories” of financial professionals who took action and did stop abuse.
Learning objectives:
To improve your understanding of the enormity of the problem of financial elder abuse in the US.
To help you understand the legal options that exist to address elder abuse, both in criminal and civil venues.
To improve your understanding of how diminished capacity for financial decisions leads to vulnerability to abuse by predators.
To provide a clear understanding of the seven warning signs of financial abuse.
To provide you with an action plan that so you can take protective action for your clients who appear to be at risk.
The family meeting is the bedrock of a successful intergenerational wealth transfer. But how does the financial professional conduct these? What are the right ways and wrong ways to go about it?
If you want to learn a process, the kind of team you need and the best ways to have family meetings with your client and his heirs, you need this course. We will give you specific pointers on how to get started, how to deal with problematic family issues and how to bring in the best experts to help you. We cover a lot in an hour, so be ready to learn. You’ll come away a lot wiser about establishing a great relationship with your client and those who will inherit his assets.
Summary of course:
Family meetings are the bedrock of successful intergenerational wealth transfers. In this course you will learn how to help your client develop a family mission statement, and how to create an atmosphere of learning for any willing heirs who will take over responsibility for a family’s assets. There may be many different kinds of assets a high net worth family has. Heirs can’t keep control over those different assets without excellent preparation. We show you how to get that preparation in place and how to make sure it works. We also teach you about the warning signs of a family that is too dysfunctional for you to be able to help with wealth transfer. Your understanding and confidence in handling a family meeting will grow by leaps and bounds with this course.
Learning objectives:
To improve your understanding of how wealth transfers fail and how to change this
To enhance your ability to facilitate communication about transfer of wealth in families
To improve your ability to retain management of assets held by aging investors that they intend to pass to their heirs
To increase communication skills for developing trust between yourself, your client and her heirs
It’s pretty well known that intergenerational wealth transfers fail about 70% of the time. What makes the other 30% successful? If you’d like to learn how you can help your client be part of one of the successful families, you’ll need to understand the critical parts of success and how to achieve them. Communication is one of the things we talk about in this course. Who better to advise us than an experienced psychologist who has worked with families for over 40 years? Dr. Davis has given us great information to help ease your way and give you confidence in creating a path to a wealth transfer that works well.
Aging clients present many challenges for their financial advisors. There are physical changes in hearing, vision and mobility as well as memory issues. This course shows the advisor how to accommodate for the changes that normally accompany aging so they can best serve older clients. It also offers strategies to address changes that are not normal, such as cognitive decline and loss of capacity for financial decisions. Talking to clients about these is likely to be uncomfortable. With the expertise of the psychologist who helped author this course, conversation scripts are offered on how to bring up and talk about delicate subjects tactfully. We illustrate advisor-client dialog with videos and demonstrate the best ways to talk to a client about giving up decision-making authority when impairment sets in.
Learning objectives:
Identify ways to accommodate a client who has physical impairments that are barriers to advisor-client communication.
Plan and know how to rehearse the words to use when it is time to approach a client with memory loss about getting a third party involved in financial decisions.
Manage client resistance to discussing these difficult subjects.
Use basic rules of communication that are proven success techniques to approach any difficult conversation with your client.
Update on what the SEC, FINRA an NASAA have in mind for financial professionals across the country in how they do business with clients over age 65. Review of the research these agencies have done, Model Rules regulators have created and what exemplary things they found firms and organizations doing for aging clients. They all want financial professionals to be more protective of aging investors. They envision mandates for reporting financial abuse of elders will and expand mandates into other areas. This course highlights areas regulators expect advisors to address, such as training in senior issues and increased communication with aging clients. It provides specifics on how to get ready for what the regulators want so that you will not have to scramble to comply with mandates.
Learning Objectives:
Understand the regulators’ concept of a “senior program” and how you can create one.
Know the Model Rules about financial abuse the regulators have already publicly posted.
Know what other firms across the US are doing about aging investors that you should be doing too.
Know what action steps you can and should take now to be ready for mandates.
Our population is living longer than ever. The risk of dementia rises with age. That means that most of us are going to encounter problems of aging in our clients.
We need to recognize the red flags of impairment that will affect financial capacity. These include:
Cognitive signs, such as memory loss and difficulty understanding the conversation
Communication, calculations and orientation problems
Emotional signs that are out of character for your client.
It is essential for every financial professional to understand the complexity of financial capacity and appreciate how many parts it has. There are 9 domains of financial capacity. You cannot determine if a person is impaired or not just by talking on the phone with her or having a brief meeting in which you give information.
A normal social conversation with the client is not a measure of whether or not the client has diminished financial capacity.
The more aware you are as a professional, the better chance you have of protecting your client from loss and protecting yourself as well.
Learning objectives:
Prepare yourself for the wave of aging clients by understanding the demographics of our aging population and the risks of dementia associated with aging.
Understand the 9 domains of financial capacity and learn how to spot problems with any one of them.
Be able to identify red flags of impaired cognition that should prompt you to act.
Develop a personal plan for what to do when you see warning signs of diminishing financial capacity
FINRA, together with the SEC and NASAA are on a joint mission to keep seniors and impaired adults from being financially abused. FINRA has proposed new rules that will allow a firm to put a temporary hold on financial transactions when abuse is suspected, and will allow the firm to contact a trusted other during this hold period.
Where’s the flaw? No rule yet mandates that every financial firm and every individual advisor obtain information for a trusted contact person for every client. Not only should this be required for all new accounts, it should be mandated that such trusted others be identified for every client over age 65. As the risk of dementia doubles approximately every five years after age 65, the reasons for the advisor to have someone to call when concerns arise is obvious.
As to the subject of the trusted other, the elder usually names an adult son or daughter as the trusted one. Sometimes that is all the information the advisor has. At the same time, the studies on elder financial abuse show us that family members are the most frequent abusers. Do you see the contradiction here? Every advisor should be required to obtain not only one “trusted person” but two or three so that if abuse is going on or seems to be a threat, the advisor can involve more than one person in the effort to stop it.
Another flaw in the proposed rule is that is it assumed that something helpful will occur during the hold period when the institution is excused from liability for not acting. But there is no clear evidence that either advisors or institutions are being trained to spot financial abuse warning signs before the money is all drained from the account. As we see it, the proposed rule focuses on doing something after abuse is clear and the institution has “a reasonable belief” that financial abuse is occurring. We think the industry can do much better than reacting by being required to call someone after the client has been taken advantage of or had the portfolio plundered.
Here’s the truth: getting an unwilling aging person to step down from financial authority over his portfolio takes more than a few days or a couple of weeks. If there is a trust in place and the elder is the trustee, the terms often state that at least one doctor, or two must say that the client is no longer capable of handling financial matters. Getting a doctor or two to see the client, do an assessment and produce something in writing with the needed findings can take months. And we’ve witnessed this exact scenario when it did take three months to oust the impaired, demented senior who wanted to give his predatory adult child a debit card for his cash management account.
At AgingInvestor.com, where we educate both financial institutions and independent advisors about stopping financial abuse, we think the effort to keep elders financially safer needs to go to the front end of abuse, not the back end after it has happened. Proactive steps can be taken. We urge every financial professional to know the warning signs of diminished capacity so you can engage the trusted third party when the signs emerge, rather than waiting until someone, whether family or outside predator seizes the opportunity to exploit diminished capacity.
To learn more about what you or your institution can do that we think is much better than simply being allowed to hold transactions for a bit when you believe abuse is going on, contact us at AgingInvestor.com. We have an entire program outline ready for you with focus on prevention.
If your client is being manipulated, holding transactions when you’re pretty sure it’s gone on can do little to protect your client. The predators and thieves can empty an account faster than it would take you to fill out the forms FINRA will inevitably give you. Think the way you are trained to think about finances generally: plan ahead, anticipate problems before they get here, and take protective action.
Carolyn Rosenblatt, RN, Elder Law Attorney, Founder AgingInvestor.com
