To challenge this result, the couple's three children would have had to come up with money to pay for the lawsuit, which the CPA knew two of the three did not have. They would also have had to work together, something he knew they would be unable to do because of family friction he'd helped to foment.
ADDRESSING ABUSE
The most practical and cost-effective way to address financial abuse is to prevent it from occurring. When it does happen, the quicker and swifter the response, the better the odds of some retribution. Even so, the cost - in terms of dollars, time and emotional trauma - will likely be quite substantial.
Abuse comes in many forms and from many sources. To protect clients, advisors need to think in broad terms about the exposure any client could face. Mitigating the risks of financial abuse can be relatively simple, but too often is left till it is too late, because clients simply don't view themselves as at risk.
One of the most important steps is to coordinate a planning team. Common to almost every form of financial abuse is the fact that acts are committed surreptitiously. If you are in communication with your client's CPA, lawyer, insurance consultant and other advisors, you are more likely to be able to identify risk points, especially another advisor who hasn't been honorable.
Often, clients will disclose certain assets to one advisor and not another. It is often these orphan assets that fall prey to abuse. Educate clients that if any of their advisors recommend a significant planning step - say, purchasing a life insurance policy whose premium is 50% of the client's annual earnings - other advisors should be consulted.
Any advisor who dissuades a client from getting the perspectives of other members of the planning team should be viewed as suspect. If the recommendations are reasonable, the recommending advisor should be pleased to have them reinforced by other professionals on the planning team.
The biggest impediment to a team approach is almost always a client's distaste for professional fees. You may need an educational process about how prevalent, broad, surreptitious and sinister financial abuse can be, and how even intelligent, aware and healthy clients can be taken scammed.
The costs of preventing abuse are quite modest compared with the loss that might be prevented. In addition, regular communications with the entire team will almost assuredly lead to better planning overall.
Another tactic: Hold regular reviews. If a new will was signed you were not aware of, find out why. Identifying abuse early might permit simple correction.
Transparency is the best prevention for many forms of abuse. In the examples in which CPAs orchestrated abuse, planners and other advisors were intentionally left out of all discussions. If any advisor tries to minimize your involvement, blow the whistle. If the estate planning attorney objects to your participating in the planning process, perhaps out of concern that it will reduce his or her position, insist on involvement. Similarly, planners should include the client's CPA and attorney in at least an annual review meeting.
Integrate checks and balances into the process. The more checks that exist, the safer the client will be. Have duplicate monthly statements sent to a trusted family member or perhaps your client's CPA - anyone other than the agent under the client's power of attorney (or trustee under the client's revocable trust).
If a client is elderly or has health issues, encourage a periodic evaluation by an independent care manager whose report can be circulated to key family members and the planning team. This might be done once a year if the health or cognitive concerns are still minimal.
Use an institutional co-trustee on trusts. There is no shortage of high-quality institutions that can serve as administrative trustees, enabling the advisor to continue to manage a client's wealth. Inserting an institutional trustee, even in a mere administrative capacity, brings another layer of independence to the team.
Help the client to simplify and organize all of his or her financial and legal affairs. It is common to have an estate planning meeting in which a wealth manager who thought he was managing all the client's investment assets discovers that there are a half-dozen other accounts he hadn't been told about.
Even if a client insists on working with several advisors, everyone should be involved and have the big picture. Ideally, a client should consolidate.
Bills and credit cards should be shifted to auto-pay and deposits made automatically, to the extent feasible. Have clienta sign up for a credit monitoring or fraud detection service. Suggest a client use a post office box to minimize the risk that someone will tamper with his or her mail.
