By Gissou Gotlieb, Field Suitability Compliance Officer
Most of us have heard of elder financial abuse and its significance in threatening our aging population. But how many of us really know what it is? The black-and-white cases are usually easy to identify, but what about the situations that are not so clear-cut? A situation can easily go from routine family dynamics (grown children living at home) to more complicated (grown children living at home and accessing a parent’s funds for their personal expenses), to even more questionable (grown children using a parent’s funds for non-essential items without the parent’s consent or knowledge). As a financial professional, how can you identify elder financial abuse?
Elder financial abuse can take many forms, but primarily can be summed up as when the elder’s assets, or their control of their assets, are taken without their knowledge or consent for personal gain or in a way that harms the elder. The examples above were about children, but many cases of abuse come from caregivers or other people the victims know. Many start innocently under the guise or even intent of being helpful to the elderly but lead into abusive situations. This abuse can be financial, but is not limited to that as it is often a result of someone in a position of trust or power taking advantage of someone who is relying on the care or assistance they provide.
How can financial professionals be on the lookout for such abuse? Most financial institutions grapple with this topic as the answer is not simple, nor clear-cut for all situations, but here are just a few examples of red flags to help you spot potential mental decline and/or abuse:
- Your client regularly forgets past conversations with you regarding their assets
- You notice a general change in your client’s behavior (e.g., not responding to your calls, not doing things they often did or recalled how to do)
- Your client tells you about a long-lost cousin or new friend who is now very involved and potentially controlling their finances
- You receive instructions about your client’s assets with you from a person who is not your client and they are insistent that they are authorized to act on behalf of your client
Considering your profession, you may be in a unique position to notice or be pulled into some of these scenarios. Once you spot potential red flags, it does not always mean that your client’s mental capacity is diminished nor does it necessarily mean that abuse is taking place. However, you can still help. You may want to get additional information by genuinely inquiring with your client about recent changes in their life or the state of their health/life. If you are still not satisfied with their answers, you may engage local resources by contacting the Social Security office, police or sheriff’s office, or inquire further by discussing the changes you have seen with your client directly.
Determining that something is actually wrong may still be challenging despite your inquiries. Therefore, if you are unsure about your client’s abilities, you can ask them to bring a trusted relative to the next appointment. If your client says that they do not have a trusted friend or relative or that you suspect their “trusted friend” is harming your client, the best option may be to alert one of various organizations available to assist. What you should not do is offer your services to be their power of attorney or receive a fee for caring for them.
Again, each situation is unique and nuanced. If you are struggling with a particular client’s situation, you may always consult your attorney or financial institution to see how you may assist. Many financial professionals have received disciplinary actions for how they handled situations with their elderly clients. Most often the intent is honorable in that the FP is trying to assist their client by acting as their trusted resource. However, in such circumstances, most financial institutions view this relationship as one where there is a conflict of interest between serving your needs as a producer and serving the interests of your client.
Even if an actual conflict doesn’t exist, the perception of it exists and most FIs prohibit such arrangements unless it is for an immediate family member and the arrangement has been approved in writing by the FI in advance. Aside from this example, other disciplinary actions have included the FP selling products or receiving compensation from clients with known dementia, signing forms on behalf of a client, receiving fees for “caring” for the client, as well as making unsuitable recommendations. Again, unfortunately, the list of offenses and sanctions are ever expanding and the offenses aren’t brushed off just because the FP may have had good intentions.
The good news is that there are many organizations you can contact and resources you may use to help educate you on the topic and available options. Depending on your state there are different entities that deal with protecting seniors and have some version of adult protective services. Additionally, there are nationally recognized entities that offer great information. Below are just a few to get you started:
The main takeaways from this topic are to know that elder financial abuse is an under-reported but serious problem, there are many grey areas in dealing with this topic so it may be best to involve professional resources rather than deal with it on your own, and that depending on your activities and involvement, you may find yourself in an undesirable position. Knowledge and education are key in handling this issue. Please call us with questions on this topic, or reach out to local resources and financial institutions with whom you do business. After all, you wouldn’t want to be kept in the dark if someone was trying to take advantage of your own mother and father, would you?
Gissou Gotlieb | Field Suitability Compliance Officer
Ann Arbor Annuity Exchange
Ph: 800.321.3924 x134 | Dir: 734.786.6134
Ann Arbor Annuity Exchange and its representatives do not give tax or legal advice. Please consult your tax advisor or attorney.
Ann Arbor Annuity Exchange is not affiliated with the US government or any governmental entity.
Designed for Financial Professionals.