The elderly are at higher risk from poor investment decisions, and elder abuse often figures into negative outcomes.
According to the National Center on Elder Abuse, roughly 10% of Americans over the age of 60 experience abuse. A full 50% of Americans over 85 suffer from some form of cognitive impairment, meaning this population is at significant risk.
As an advisor, you are in the position to help your clients guard against this type of abuse. It’s important to ensure that families have strategies in place to address the possibility of impairment and put checks and balances in place to safeguard financial assets. And particularly with the rise of robo-advisors, it’s important for active managers to take a role in keeping elderly clients from making bad decisions.
Many financial plans hinge on the definition of “capacity,” and when the individual in question lacks sufficient capacity to make financial decisions. However, the definition of capacity can range widely – some clients might believe that it diminishes the moment they become slightly forgetful, while others might insist that they are competent to make decisions even when virtually comatose. Therefore, it is incumbent upon the advisor to define capacity early, when there are no questions.
Next, it’s important to work closely with the family of the elderly client to determine what resources are available for monitoring the client’s finances. How much time will they have, and how much responsibility are they interested in delegating to an advisor?
And while family can be the first defense against abuse, family members can also be part of the problem. Advisors need to be vigilant in terms of monitoring the family’s actions and how consistent they are with the client’s best interests. Remember, in 60% of abuse cases, it’s a family member who is the perpetrator.
A revocable trust can be a useful tool for protecting your client. This can automate many financial processes, and most trusts will include a clause that appoints a new trustee in the even that two medicial professionals deem the original client/trustee incompetent.
For more information, please read:
Seven Tips For Protecting Clients From Elder Abuse | Wealth Management