When an elderly client insists on making a large cash withdrawal or abruptly selling a batch of long-held securities, how should the advisor respond if they suspect their client might be the victim of abuse?
Or, if in the normal course of monitoring the client's accounts, the advisor notices an unusual series of deductions that tees their suspicions -- what then?
Investigating potential elder abuse can be tricky, particularly when dealing with a long-time client who might be suffering from cognitive impairment. The first step, of course, would be to ask the client about the activity -- a necessary starting point before going on to involve relatives or any other third party.
"It starts with a direct interface with the client," says Thomas West, an elder abuse expert and a senior associate at Signature Estate & Investment Advisors in Tysons Corner, Va. "You want to make sure that the first line of inquiry is with the client directly, and then only under a predefined set of circumstances do you give permission to contact a broader circle of family members."
West and others recommend working out a plan with clients early on that addresses the prospect of elder abuse and diminished cognitive ability, giving the advisor authorization to share concerns about the client's situation with a designated set of people.
From a compliance standpoint, having that agreement in place detailing a specific chain of communication can help shield advisors from potential liability under privacy laws.
"They have a privacy responsibility," says Daniel Bernstein, chief regulatory counsel at the compliance consultancy MarketCounsel. "They cannot go to other family members and say, 'Do you know what your dad's doing?’"
Advisors acknowledge that having a conversation with clients about planning for later-stage issues such as cognitive impairment or the prospect of falling victim to financial exploitation is not easy. Still, difficult though it may be, some argue that talking through those issues -- the earlier the better -- is a core function of their role as a trusted advisor.
"I think that good advisors prep the client that part of my job is to have uncomfortable conversations with you," West says. "That's what you're hiring me to do."
Advisors can help their clients and their own cause when they involve relatives, friends or other professionals in the discussion. Several RIAs tout the benefits of getting to know their clients' children, and building a working relationship with their attorneys, accountants and other professionals.
"The key would be the relationship with the children," says Tom Hebrank, CFP, president of Advanced Planning Solutions which provides senior healthcare planning services for fee-only planners.
Joseph De Sena, president of Siena Wealth Advisory Group, an independent practice under the Ameriprise umbrella, says his team will often "quarterback that process," and works to ensure that clients have appropriate estate planning documents in place, such as a power of attorney agreement, a living will or a health-care proxy.
Crucial as that documentation can be, there is no substitute for keeping in regular touch with a client's relatives, De Sena says, arguing that involving children in the planning process early on can make it easier to intervene as soon as the advisor notices that a client might be slipping and potentially the target of abuse or exploitation.
"If we notice diminished capacity, we'll have a joint conference call," De Sena says. "The joint calls work very well.”
This story is part of a 30-day series on better serving seniors.