WASHINGTON -- As advisors increasingly deal with issues of serving an aging client base, regulators are looking more closely at the policies and programs firms have in place to protect older investors.

Regulators increasingly expect firms to be able to show examiners what kinds of training programs they have developed to help employees spot signs of diminished capacity in their clients, according to Daniel Sibears, FINRA's executive vice president of regulatory operations.

Sibears, who spoke recently at an industry conference, said that his organization and the SEC "have been very active together working in collaboration on some senior investor issues," though he stresses that the regulators' reviews are very much ongoing.

"This is kind of a fast-moving issue. As we dig into [it] we learn more and more of the problems and the issues we need to deal with," he says.

Earlier this year, the SEC and FINRA jointly produced the results of the series of exams they had been conducting, an effort that produced some preliminary findings that compliance experts suggest firms review closely.


"Our conclusion is that you really can't go overboard in training the right people," Sibears says. "We're not going to make people social workers here, we're not going to train everybody to be psychologists and pick up everything, but there are certain fundamental things that we can train the folks who have the point of contact with investors to pick up, what signs to pick up, about things like early cognitive impairment."

Some industry experts offer similar observations.

At Wells Fargo Advisors, Ron Long has been leading a team looking into elder issues, including spotting signs of diminished capacity, the protocols advisors should have in place to respond to potential abuse, and the tangled set of applicable laws and regulations that firms must navigate.

"This is much messier than we actually thought," says Long, senior vice president and director of regulatory affairs and client initiatives at Wells.

He explains that in looking into how firms are dealing with elder issues, it became clear that many practitioners on the front lines don't have the knowledge and training needed to identify when clients begin to slip, leaving clients potentially vulnerable to scams and financial abuse.


John Koehler is senior vice president of advanced markets at Transamerica Capital, which has been working with the MIT AgeLab to evaluate how financial services firms can better serve elderly clients, focusing in particular on issues relating to cognitive impairment. According to Koehler, seven out of 10 advisors are working with a client who has Alzheimer's or dementia, and the average advisor is working with seven clients who have one of those afflictions.

"Alzheimer's is an epidemic affecting the industry," he says. "It is not if your clients are going to be impacted by Alzheimer's and dementia, it is literally how many. So it's an issue that more and more advisors are dealing with."

But many advisors, particularly those in smaller practices, are already juggling an array of client-service and compliance issues, leaving little room for elaborate training initiatives addressing elderly clients.

Long says he is sympathetic to those challenges, but he argues that cognitive decline, along with the innumerable con-artists who prey on the elderly, demand a more vigorous response from the advisory community. At the very least, he suggests that practices designate an individual within the firm who can serve as an in-house resource. That person, ideally, would have the chance to engage with members of the scientific community who are looking into issues around aging, as Koehler's firm has been doing with MIT.

"Every firm can't set up a centralized unit, but they [need] to train someone, whether in compliance or somewhere that would be more aware of these issues," Long says. "Go to the conferences that tell us more about what happens to that aging brain so that at 75 you actually believe a Nigerian prince is your friend and simply needs your bank account, or that you've won the Jamaican lottery, albeit that you never did buy a lottery ticket."


Training and education only go so far to guard against situations where an elderly client might be the victim of abuse. Experts also note the importance of having in place mechanisms for escalating an issue, which could cover a front-line employee reporting up the internal chain, then the firm potentially involving outside counsel and the relevant authorities.

Regulators say that they are flexible in their expectations for what each firm's program should look like, acknowledging that any number of factors can shape how a practice approaches training and reporting. However, it's clear that they are expecting advisors to implement some defined policies and procedures relating to senior investors.

"There's no one-size-fits-all with this," Sibears says. "It depends on your firm, your structure, your size, the types of your clients and your products and services. But build an escalation process in, because I would say you can't expect every single person that deals with an investor to be an expert in this space, but you can have a couple of people or a few people, depending on the size of your firm, that can be experts and can guide the rest of the workforce about how to handle these situations."

Kenneth Corbin is a Financial Planning contributing writer in Washington and Boston.

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