1. What issues are seniors facing?
Million of dollars are lost every year by older Americans, and we want to try to prevent that from happening by identifying people who are potential victims. One of the things that makes them victims is the loss of cognitive skills. We know from academic research that you will have a chance of not being able to understand financial products as well as you did when you were younger and therefore are more at risk of making the wrong decisions.
2. What should advisors look out for?
As clients age, maybe they're not showing as much concern about a product that they're looking at and might be shaking their head 'yes,' but that really doesn't mean anything. They used to be able to understand this but now it's a little more difficult. So you make sure they fully understand it, that you have it in writing, that they've gone over it, they understand the options and they don't make mistakes such as moving funds from one account to another without recalling that there were significant fees they were supposed to understand initially and all of a sudden they're losing a third of their investment because they're switching from one annuity to another. They don't realize they're making that mistake because they have become less risk averse.
3. When should advisors start to prepare?
There comes a time when there is a role reversal among the adult children of older Americans. As their parents age, those adult children take on more responsibility for their mom and dad in a living situation. It's a difficult discussion to have but the best time to initiate [those talks with an advisor] is when their parents can still talk about their wishes in a way that gets it down on paper and gets it into the financial plan. We are starting to see some advisors ask for family consultations in a multi-generational setting. The advisor brings in a counselor to facilitate the discussion in a non-confrontational way while the advisor does what he or she does best; which is looking at all the financial data, crunching those numbers and coming up with a plan for that individual or family to consider. What we're finding is that many parents are unexpectedly relieved at not having to handle their affairs by themselves knowing there is a professional there.
4. What is the role of regulatory agencies?
The Financial Planning Association and the [Certified Financial Planner] Board of Standards have given increasing attention to the issue of preventing financial exploitation and have been alerting planners to be aware, particularly among their older clients, that they should work with them to see if there are signs of something wrong with the way their money is being managed. Both the [Securities and Exchange Commission] and FINRA have educational outreach programs but the SEC is best served when it is partnering with nonprofit organizations who are operating at the community level.
5. Are you nervous, especially with boomers readying for retirement?
I'm just really energized. I'm really happy with the approach and the partners we have found. People have begun to realize that it's a threat to all of us if a senior loses [his or her] life savings. Millions of boomers losing money in this economy is going to be a real drain on our society.