What Should You Say To A Client With Diminished Capacity?

What Should You Say To A Client With Diminished Capacity?

Mar 1, 2017 | aging investor, elder investor

We've all had them. Those clients who seem to be more and more forgetful. They're with it some of the time and other times, not so much. They call you multiple times asking the same questions. They repeat their stories to you. It gets scary is when they start wanting to do dumb things with their money.

Unfortunately most firms do not have clear and specific protocols for you to follow when a client begins to show those telltale signs that he's slipping mentally. Or that she is flat out vulnerable to manipulation by some unscrupulous person. You see it, but what can you say? You just carry on hoping it will get better or that family will take care of it. But that doesn't happen. Then what?

At AgingInvestor.com we think it is far too dangerous for you to simply ignore the problem, or expect someone else to take care of it for you. If a scammer takes Dad, you will know when those strange and unexplained large withdrawals start coming out of his account. Family can reasonably expect that you will do something to keep your client, their father safe financially. That's fair enough, but how do you start?

First, you need to document every instance of anything that you observe that shows you that your client's ability to make financial decisions is becoming impaired. You don't need to be an expert to see what's obvious. Multiple phone calls in one day with the same question is an example. When you explain something slowly and clearly enough for a high school kid to understand and your formerly sharp client doesn't get it at all, that's another example: easily confused. There are numerous signs.

When you have collected the signs over a period of say, six months or more, and you have carefully recorded them somewhere, it's time to bring your client in for a face-to-face conversation. If you are at a distance, this may have to be by phone but it has to happen.

Start with your concerns. For instance, you can say "Jack, I'm getting concerned about some things I've noticed with you over the last few months. I've heard you ask the same thing multiple times in the same day. I have noticed that you are forgetting some important things I've explained to you about your portfolio." Jack may push back and probably will. You follow up by calmly showing him or describing to him the dates and your documentations of instances. "See here's what I mean. This is worrisome to me Jack. My job is to be sure your money is safe and that no one tries to rip you off. When you forget a lot, predators are waiting to target you".

Then you bring the conversation to the ask. "Whom do you trust that we could involve in being a backup safety person with you, or just joining in on the decisions about your investments here that might be a reassurance for me that you are ok?"

If you were smart before the diminished capacity issue came up long ago, you would have had Jack identify two trusted others you could contact in this situation. You would have had Jack give you permission to disclose protected information with the trusted others and thus dispose of the barrier that stops so many: the privacy issue. All this would be in your client file.

People respond to this approach in various ways. If you know your client, you will know some words that may work best with him or her. The point here is that you need to have this conversation, which may initiate a series of steps to keep that vulnerable client with diminished capacity as safe from predators or his own foolish decisions as you can.

Here are some takeaways from AgingInvestor.com, where you can learn more on this subject.

  1. Face the issue that you have to address this, awkward or not. Diminished capacity must not be ignored.
  2. Document each and every sign of diminished capacity as you communicate with your client. Here's a checklist to help you.
  3. Open the conversation by making it your concern. You are worried about the client. You want to keep him/ her safe. You want to do your professional job.
  4. Have at the ready your trusted 3d party contacts for your client. Get your client's permission to involve the trusted others at the earliest opportunity.

Does this expand your role as a financial professional? You bet. But there is no escaping aging clients and the issues longevity brings. Be ready for them.

Carolyn Rosenblatt, R.N., Elder Law Attorney, & Dr. Mikol Davis, Gerontologist co-founder of  AgingInvestor.com

Is Your Aging Client Being Seduced Away By Another Advisor?

Is Your Aging Client Being Seduced Away By Another Advisor?

Oct 13, 2016 | aging, aging investor, Alzheimer's disease, elder investor, financial elder abuse, investor, scammers, senior citizen investor, senior investor

Lots of sellers of products are trolling for new clients, new prospects and older investors with substantial assets. They use a proven technique that could trap your client.  You can educate your clients early and often about the technique, which is the “free meal educational seminar”.  These seminars are not, by themselves, a bad thing. Perhaps you’ve even put one on yourself, or considered doing so. But too many unethical people are using these to sell inappropriate investments to older people.  The annuity scams are notorious for this checker informative hints.

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The Emotional Impact of Financial Elder Abuse

The Emotional Impact of Financial Elder Abuse

Oct 4, 2016 | aging, diminished cognition, elderly, finances for elders, financial elder abuse, handling money for seniors, scammers, seniors finances

The Emotional Impact of Financial Elder Abuse
When older persons are deceived financially by hose they trust the most, the emotional effects can be devastating. The problem of financial elder abuse costs our older population over $36 billion per year in the U.S. alone. The reasons for this rampant problem some call  “the crime of the century” are  complex. Many victims cognitively impaired in some way, and are therefore subject to the undue influence of greedy relatives, caregivers, professionals, or criminal  predators who strategically seek out  older victims. However, not all seniors who fall victim to financial abuse are affected by cognitive decline. Some competent people are seduced by unscrupulous sales pitches promising  big  rewards. Some are cheated by the Bernie Madoffs of the world and their cohorts who take advantage of  seniors  who  are  worried  about  having enough  money. These victims see the pitch or offer as a  way  to alleviate their money insecurity and they  give up  their  cash  to  those who  want  nothing more than  to take  it  and  run. Sometimes, the senior  may want to  get something  for  nothing  or  get  a  “great  deal’  with  very little  perceived risk.

Abusers are not always shady characters or unscrupulous family members. Sometimes they are legitimate organizations that simply find an opportunity to take advantage of someone with whom they already have a relationship. Using a relationship of trust to manipulate an older adult is called undue influence. The laws protecting them from being victimized by undue  influence  vary  considerably  from state to  state,  with  some defining it  so  vaguely  that enforcement  is  difficult. However, whether the law is used to convict  abusers  of this crime or not, the effect on an aging  person is  devastating.  It is hard enough to realize that one has been duped by a stranger.  When one understands that the manipulator is a trusted relative, friend, an organization in which  a  person  truly  believes  or  contributes to,  the  pain  is  even  worse.

Wanda’s  Case

Wanda was eighty-nine years old at the time her daughter, Janis, contacted an attorney. Janis reported that Wanda had been a member of her large church all her life and had been an active participant in the congregation. She had always made modest contributions to the church and trusted all of the other members. But over time, Wanda’s memory began to decline and she got confused easily.The church began a fundraising campaign for new construction. Wanda was asked for a donation, which she gave. Then another request came and Wanda once again complied. Wanda gave larger and larger donations to the church over the next year, with the checks totaling over $100, 000.  Janis grew increasingly alarmed, because her mother clearly  was  in  need  of  help.  Wanda was found lost and wandering near the church after one day. The church itself had recorded the incident and a church worker had taken  Wanda  home. Janis was concerned that Wanda would run out of?money. She was physically ok, but her mental condition was becoming  a  serious enough  problem  that Janis believed  she  should no longer  live  alone.  And Wanda trusted the church, to the point that she did not believe that anyone  there  would  do  anything  wrong. This was a case of the church using its position of influence over an  impaired  member  to  elicit  larger  and  larger  financial  contributions  from  her. They took advantage of an older adult who had become lost and confused after church, and they knew it. Wanda could not perceive that she needed care, which was going to be expensive, and that she could all  her  reserves  by  these overly  generous  donations.  She was not able to act in her own best interests.  She ?believed  that  she  could  not  possibly  run out  of money. When her daughter, Janis, tried to explain that she had to stop giving to the building fund,  Wanda  was incredulous. She simply could not process the reality that she was going to lose all her savings if she kept up the contributions.? She became angry with her daughter for even suggesting that her actions were not  right and that  the  church was  out  of line  doing  what  it  did.

Wanda’s emotional response to the abuse was to be in denial about it. She likely not able to fully process what had happened and felt that Janis was  being disloyal  to  the  church. The matter did get resolved. When the church was contacted  to  meet  and  discuss  the  pattern  of  solicitations they  had  sent  to  Wanda  and  their  record  of  her being  lost  after church  services,  they  immediately contacted  an  attorney  who put  a  stop  to  their  actions. Janis was able to watch over Wanda  after  that  and  she  did obtain  help  for  her. Wanda’s anger at Janis was an unfortunate effect of stopping the abuse. Wanda would likely have been angry at the church had she been able to perceive that she was being manipulated.  However, she was cognitively impaired and did not see?the full  picture.

The Emotional Impact of Abuse

Undue influence is not the only means of taking advantage of seniors. Any kind of elder abuse can be devastating. Denial is common after older victims discover financial abuse. When a scam is underway, they tend to keep  up  hope  and  continue engaging  with  the  scammer. Despite warnings from family, friends, and advice from knowledgeable  others,  they  continue to  believe that  the  big  payoff  is  coming. Or they are unable to embrace that  they  have  made  a mistake  and  trusted an  untrustworthy  person. Sometimes, even after the evidence of fraud mounts, the  victim  continues  to  give money  to  the  predator. They have put their trust in someone whom they very much want to believe  was trustworthy. When the payoff does not come, or nothing that  was  promised  materializes,  they  eventually  realize they  were duped. The effect is sometimes intense shame and embarrassment.  Living with this shame often leads to depression.

Suicides resulting from financial abuse have been reported.  Some never recover emotionally  from  the feeling  of  horror  that  they  were  “so  dumb”  as  to  fall for  a  scam  that  in  retrospect  looks a  lot  more  obvious.  It damages a person’s sense of self, and sense of being able to  trust  one’s  own  judgment.  It can go to the core of a  person’s  self-esteem,  leaving  the  victim with  a  belief  that  he  can  no longer  trust  himself with anything  financial. When a senior loses most or all of her assets and is left impoverished, it becomes a constant reminder of the  shame  of being  duped  by  someone  else. Losing a home can force the person to live somewhere he does not choose to be. That can be with relatives if available,  but  it  can  also  land  him in  a  Medicaid  bed  in a nursing  home  where  few  would  ever  want  to live  out their  last  years.

Prevention Strategies

No one is totally immune from fraud and financial abuse.  Anyone can be victimized. Many a sad tale is told by an adult child of a victimized aging parent that  “I trusted my father and didn’t want to question him.”  Or,  “I thought since my mom was a CPA, she would never fall for  that.”  Part of the problem is the perception adult children and even some professionals have that certain  folks  are  never going to  be  abused  financially  because  they  are  smart,  or experienced with money  matters. It is simply not true that education or experience protects everyone.  Working with older adults puts professionals in a position to  be  vigilant,  to  educate  about  the  risks of  abuse  out there,  and  mainly  to  pay  attention.

Using Resources to Help Victimized Clients

While the criminal justice system prosecutes the relatively small number of abusers who are reported to authorities, it does not  do  much  to  help the victims of abuse. Money stolen from older people is often long gone by the  time a predator is brought to justice. When a criminal is prosecuted successfully, the  court will  order  that  he  make  restitution  of stolen  monies  to the  victim,  but  enforcement of  restitution  orders  can be  problematic.

What is almost entirely lacking is any resource to help a victim of financial abuse manage the emotional effects of the crime.  We simply do not fund this in our justice system.  If victimized seniors wish to get emotional support or mental health help to recover from the impact  of  financial  abuse,  they  would  have to  do  so  on  their  own. The cost is clearly a barrier, though Medicare does provide for  psychological  services.  However, the benefit has limitations. A diagnosis is required for  the  provider  to  get  payment.  And many people attach a stigma to getting mental health help, which is an unfortunate perception that stops some from obtaining the needed  psychological  support  for  recovering. If there is a civil case of elder abuse with a successful outcome, and financial damages are actually awarded to the victim as a result, the award may include expenses for psychological treatment for the victim. Therapy is one means a victimized person  can learn  to  cope with  the  emotional distress, shame, and? humiliation of being taken advantage  of by any financial abuser. There is little doubt that those who receive supportive services after victimization  cope  better  and have  a  better  chance  of healing from  the  trauma.

Professionals’ Roles with Abuse Victims

Professionals who work with aging adults in any capacity will likely encounter someone who has been victimized or is in the process of  being taken  advantage of by  another.  It is important to know their own community resources to provide information to anyone who may need help. Understand how difficult it must be for the person who has been victimized, and offer a respectful referral  to  a  local  resource. Local mental health providers can be found through the American Psychological Association, Psychologist Locator, community service agencies such as Jewish Family  Service Agency  (serving people of all faiths), the  Alzheimer’s Association, or senior centers throughout the U.S. Most offer information and referral to local providers in the  senior’s  county.

Warning  Signs

When suspecting financial elder abuse, those working with them  should be  aware  of these warning  signs:

1.  The presence of a new “friend” in a client’s life who has an inordinate interest in the older person’s accounts  or  assets,  and who  gains access  to any  of them.
2.  Sudden change in a Durable Power of Attorney document.
3.  Isolation of the older adult from friends, family, and others close to them.
4.  Large gifts to strangers or people they don’t know well.
5.  Complaints about having reached maximums on credit cards when this has never happened  before.
6.  Frequent email or telephone contact with any stranger who establishes a relationship  with  the senior  that  seems  addictive.

With the effort of those in the community surrounding older adults, we can all  take  steps  to  intervene  and  prevent  or  stop  abuse. If something seems odd to you, speak up, ask questions, step  in  where  you can. You just might be the key to keeping a senior financially safe.  And if you learn of abuse in the  course of  doing  business  with  a  senior  client,  a  kindly  approach  in  offering emotional  health  resources  lifts both  you and  the  victim.

BY CAROLYN ROSENBLATT, RN, ELDER LAW ATTORNEY
Carolyn Rosenblatt has over forty-five  years of  experience in  her combined professions  of nursing  and  legal  practice. She is co-founder of AgingParents.com, a resource  for families, and Aginglnvestor.com, offering educational training and products. She can be contacted at  (415)  459-0413,  carolyn@aginginvestor.com.

REFERENCES
Journal of Accountancy.  2015.  “Emotional harm of elder financial abuse outweighs  its financial  damage."  www.journalofaccountancy.com/news/2015/jun/elderfinancial-abuse-201512535.html.  Accessed January 2016.
MetLife Study on Elder Abuse, www.metlife.com/assets/cao/mmi/publications/studies/2011/mmi-elder-financial-abuse.pdf.  Accessed January 2016.
Rosenblatt, Carolyn. 2015. “Protecting Our Aging Parents from Abuse."  In The Family Guide  to  Aging  Parents:  Answers  to Your  Legal,  Financial  and  Healthcare  Questions.  Sanger, CA:  Familius, 284-296.,  2015.
“Common Elder Specific Issues." In Working With Aging Clients: A Guide for Legal, Business and Financial Professionals.  Chicago:  American Bar Association,  71-76.

This article was originally published in the CSA JOURNAL 66  / VOL.  2, 2016  / SOCIETY OF CERTIFIED  SENIOR  ADVISORS  /  WWW.CSA.US

The Inner Workings of Clients’ Financial Decision-Making Ability

The Inner Workings of Clients’ Financial Decision-Making Ability

Sep 28, 2016 | aging, aging investor, Alzheimer's disease, diminished cognition, elder investor, elderly, finances for elders, financial advisors, financial capacity, handling money for aging parents, handling money for seniors, senior citizen investor, senior investor, seniors finances

The Inner Workings of Clients' Financial Decision-Making Ability

Whether you have a lot of older clients or just an occasional one, it's critical for every financial professional to understand whether a client can safely make decisions about money. It might seem straightforward when your client is able to carry on a conversation, talk about current events or make a joke. You assume she's fine, but it's not that simple. Conversational ability can mask a true disabling brain condition we call dementia. It does not reveal itself easily, particularly at the earliest stage.

The insidious onset of Alzheimer's disease or other dementia can sneak up on a client and affect the ability to exercise judgment about finances. To help your clients, you need to know the red flags of diminished capacity, a basic skill anyone can learn. You can get a free checklist to help your do that at AgingInvestor.com. But beyond that, it is critical to understand just how complex our capacity to make safe financial decisions is.

Research shows us that with the most common form of dementia, Alzheimer's disease, financial capacity is moderately impaired even at the very beginning of the disease process. By the time a client gets to the middle stage when symptoms are more obvious she is already severely impaired in her financial capacity. No one should be making independent decisions about finances with severe impairment of this capacity.

This financial ability is defined as "the capacity to manage money and financial assets in ways that meet a person's needs and which are consistent with his/her values and self interest." It is broken down into nine areas or "domains". These include cash management, basic money skills, bill payment, and financial conceptual knowledge. The ones an advisor is most likely to see and assess are knowledge of personal assets and estate and investment decision-making.

You may not discuss with your client whether he understands what a money market is but you will be ethically obligated to discuss the pros and cons of various suggested investments and the effect they will have on your client's overall financial picture. This is the area where older clients with impairment will not be able to process the information you are offering them. When they are affected by brain disease like Alzheimer's (over 5.5 million people are diagnosed now, with that number expected to rise dramatically) they will not be able to "get it". You are on dangerous ground if you proceed to recommend or sell any financial product in the face of serious doubt about a client's financial capacity.

Granted, many financial products are complicated and the average person may not grasp all the nuances. But when you believe your client is probably impaired and cannot understand any carefully worded explanation you give, you are exposing yourself to liability by going ahead with transactions for that person.

How could this get you in trouble? All of the regulatory agencies want you to keep your older clients safer and they have issued guidelines for how to do that. All of them want you to know the red flags of diminished capacity. Financial capacity is the most complex of the kinds of capacity a person can have. If you do not involve a third party to assist the client with financial decisions, you risk a bad outcome and regulatory prosecution. You also risk the heirs coming after you in civil lawsuits, charging that you should have known what everyone else knew at the time, that their mother/father was impaired and you should never have sold that, done that or caused the bad outcome.

This is a very real problem among financial professionals-- the failure to recognize and act on the warning signs of diminished capacity. If you are managing a retirement account for that client, beware even more. Acting in the client's best interest means that you need to understand when the client's financial decision-making capacity is going downhill.

This article just touches on the complexity of financial capacity. Everyone deserves to have a deeper understanding so you can avoid prosecution or questionable accusations about your recommendations or the client's investments. When the investment an impaired client went for at your suggestion loses money, you can bet someone will blame you if they can. Don't set yourself up. Don't make it easy for them to attack you.

The way around this risk of working with an impaired client is to have your client's permission to involve a trusted third party as a surrogate decision maker for all financial transactions. How you get that permission is the subject of another article and it needs discussion. In the meantime, take a deeper dive into the nuts and bolts of financial capacity in Succeed With Senior Clients: A Financial Advisor's Guide to Best Practices, available here. Chapter Two explains all you need to understand about the components of financial capacity. And the privacy question and how to get that trusted other involved is answered in the book too.

By Carolyn Rosenblatt, RN, Attorney, AgingInvestor.com

Are Advisors Miscalculating Retirement Medical Costs?

Are Advisors Miscalculating Retirement Medical Costs?

Aug 31, 2016 | aging, Alzheimer's disease, elder investor, elderly, finances for elders, financial advisors, handling money for aging parents, handling money for seniors

Are Advisors Miscalculating Retirement Medical Costs?

According to CNN Money, a 65-year-old, healthy couple can expect to spend $266,600 on out of pocket costs for Medicare premiums in retirement. If that's the advice you give clients about what needs to be set aside for medical expenses you're missing some major facts.

Medicare premiums are a relatively small part of what it can cost when health issues arise as people age. No one likes to discuss the subject of possible cognitive impairment, but it has to be done. We see it as the financial advisor's responsibility to bring it up, include medical expenses in the overall financial plan and get the truth out on the table.

According to a Wealth Management article on August 30, 2016, Fidelity Investments did a survey of over 350 advisors and found that 96 percent felt unprepared to help clients who had Alzheimer's disease. This is in contrast to the reality that a person's chances of developing the disease are at least one in three from age 85 and above. And we are living longer than ever in history. More centenarians, more Alzheimer's.

What is the real cost of caring for a person with Alzheimer's? I interviewed a high end home care agency owner about this question. Many HNW people do not have long term care insurance as they plan to pay for whatever they need out of pocket. Most are not aware of the cost of best quality 24/7 care they could need with their own longevity. In our work at AgingInvestor.com, we have encountered this scenario and have seen what best quality care looks like. It's not your average home care agency.

The cost for caring for one person at home with Alzheimer's from that agency is $300,000 per year. The workers are specially trained and well supervised. A care manager develops a plan and the workers take their shifts, prepared to deal with all manner of difficult dementia-related behavior, including violent acts and words, wandering out the door, refusing to bathe as well as those who are unable to express themselves verbally any longer. Non-specialty home care agencies do not accept this degree of client behavioral difficulty out of fear of their workers being harmed.

The ultra HNW client can pay for these costs but for everyone else, the expenses incurred with care for a progressive disease that escalates in difficulty over time could be devastating. The cost of home care is in the category "long term care" an often poorly understood subject among those outside the health care and insurance fields.

If you have clients who are at retirement age or are retired, it is a necessity that you educate them about these risks to their savings. When you work with them on their plans, you need to include the possibility, very real, that one or the other of a retired couple could develop dementia and need expensive home care. If you think they should just go onto Medicaid, think again. Every state has different rules but in all states a person can't have much left in the way of assets and savings in order to qualify for Medicaid. And most importantly, people typically want to stay at home as they age. The quality of care they are likely to receive on Medicaid for long term Alzheimer's care is low, and likely to be in a nursing home. No one wants that!

The takeaways

  1. In developing retirement plans for clients consider the risk that your client may develop Alzheimer's disease or related dementia. Bring it up and talk about it.
  1. Plan for significant savings to be set aside in case care is needed, not just for Alzheimer's but for any long term condition or disabling illness requiring help. Use real numbers, not vague assumptions.
  1. Do not underestimate the real costs of caring for a person with this kind of dementia. It can last as long as 20 years. Do the math for your clients and show them what they would need to be cared for at home with a long term expensive illness like Alzheimer's.

The responsibility to know about long term care costs is yours. To learn more about Alzheimer's and how to spot the warning signs, get a free checklist to get you started at AgingInvestor.com.