SAN ANTONIO -- Your older client wants you to make a decision that is not in her best interest. What should you do?
Advisors are increasingly faced with clients who are vulnerable to elderly abuse, whether they are actually losing their capacity to make decisions or not. For example, if elderly clients demand the ability to drain their accounts, it may be because they have fallen victim to an Internet scam or are being taken advantage of by a family member. In these cases, an advisor is often stuck in the middle.
Advisors always need to be aware of the basics of protecting their more vulnerable elderly clients. Here are a few tips to keep in mind:
1. Identify whether your client is at risk.
According to Brandon Reif, managing partner at law firm Winget Spadafora & Schwartzberg, age alone does not indicate whether or not clients are losing their cognitive abilities.
“In 2011 FINRA’s priorities considered a vulnerable client someone who was retired,” Reif said at the FSI OneVoice conference. “And that caused a lot of concern for me.”
It’s a misconception that aging must lead to a diminishing of cognitive abilities. Plenty of older clients maintain their capacity to make decisions, Reif said. “You have to understand there is a difference between the normal signs of aging that everyone faces versus someone that has now become vulnerable and susceptible to persuasion.”
Reif noted that a client’s vulnerability isn’t something that can necessarily be identified by just one meeting.
“The big fear is that there are a lot of false positives that someone is a vulnerable client,” he said.
One false positive Reif discussed is that of a client whose vision is worsening. This client may still have sharp cognitive abilities but may need a bit of help in other areas. So they are vulnerable in a sense, but their vulnerabilities can be easily handled. For instance, an advisor can encourage the client to get a larger computer screen so they are well-aware of what they are looking at and clicking on. “You can take a situation where someone may be vulnerable, and you’re taking it off the table,” said Reif.
2. Know where to report to.
“I now have a centralized unit of nine people, so all the calls from all 50 states come to this group,” said Ronald Long, director of regulatory affairs and elderly client initiatives at Wells Fargo. “And they are there to council, assist and provide help to the financial advisor if a report needs to be made to adult protective services or law enforcement.”
However, Long noted smaller firms are at a disadvantage because they don’t have enough staff members to provide that service. He believes firms, no matter their size, need at least one person to gain knowledge on the reporting structure of elderly abuse, from a legal perspective, in the states where these firms operate
3. Freeze the accounts.
“These are real-time decisions, and there is no playbook on what to do and what not to do,” said Reif. “But if the goal is investor protection, I’m going to give advice that I think would make the most sense for all involved, and there is a trend that freezing an account is the way to go.”
Reif noted the advisor is now faced with the issue of freezing all the accounts the client has or simply the account they fear is vulnerable to a transaction that could harm the client.
“As a trial attorney that would be handling this litigation if and when it gets there, either one is fine with me,” Reif said.
4. Know who to call.
When determining if a client is losing their capacity to make decisions, it’s important to know which family member or friend can be trusted to discuss that issue.
“I don’t encourage this to everyone,” said Long. “But sometimes you may have to breach confidentiality and call and say, ‘Something is happening with your mom. I can’t talk details about the account, but you need to come back to St. Louis to look into your mother’s situation.’”
However, Long said, there is a way of preventing that. When a client opens an account, they include an “in case of emergency” contact to allow the client to inform the advisor as to who should be contacted if cognitive issues do arise.
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