Financial Elder Abuse

New Speaker:

Welcome to The Financial Planner's Desk podcast, a podcast designed for you with Financial Professional. We'll keep you up to date on industry trends and technology and marketing and we'll always keep you in the loop on new regulations. Here's your host, independent advisor and OSJ, Richard Oring.

Richard:

Wow. I'm really excited to be kicking off our first episode of The Financial Planner's Desk. It's been in the works for quite a while now. I know that you're getting information from your back office, you're reading bulletins, you're taking these courses, but there's something about getting some advice from your own colleagues, and hopefully, that's what you're going to get out from this podcast. I hope you enjoy it. I hope you subscribe. Let's dig in into our first episode.

Richard:

For this episode, we're going to be talking about financial elder abuse. I know that we've taken classes on this every year, but it's something which is growing every single year. We see more and more cases and unless you've experienced it and had to go through this with one of your own clients or a family member, everything we got taught in the past, we may not remember everything. We might be a little bit hesitant. We might get started getting nervous, like, "What do I do? I don't want to offend the client. I don't want to piss them off. I want to get them their money, but I also want to protect them."

Richard:

At the end of the day, we are there to help our clients to make sure that they meet their financial goals and sometimes that's to protect them from their own selves. That's all great and everything, but God forbid, I have a client who calls up, they ask for a large sum of money out of the norm, and I'm like, "Whoa," and I'm going to start asking you questions, they sound like they are making sense, but there's some issues where they may not, and I'm a little hesitant in doing anything. Why? The one thing we all fear in this industry is that client complaint, but you don't need to worry about that for this particular issue.

Richard:

There are some safeguards which have been put in to help us as investment advisors to be able to look out for the best interests of our client, to give us time, to investigate, to see if the client is being abused or has diminishing mental capacity that was passed on May 24th of 2018 with the Senior Safe Act. This act gives us immunity from liability in any civil or administrative proceedings for reporting potential exploitation of a senior citizen. This act defines a senior citizen who's at age 65 or above.

Richard:

To qualify as an investment advisor to be protected by this new act, which I guess it's not really new anymore since it's been around May 24, 2018, but to qualify, you must meet some requirements. Some of it is on special education. Now, most likely, if you're affiliated with a broker-dealer, you're probably already taking this education. If not, if you're an independent on your own, fee-only, not associated with a broker-dealer, you might've already taken some of these courses. If not, you probably want to look to see what's out there. There are some other requirements which are necessary. I'm going to have those on my show notes on the podcast website. I would encourage you to look at those.

Richard:

I'm an OSJ and I'm also an investment advisor with his own client base. I want to share two stories with you. One of them happened many years ago and the other one was just more recently. The first had to do with one of my own clients. I had a husband and wife as a client I got in 1999 when I first got into the business, and unfortunately, the husband passed away soon after from complications with a heart surgery. He left his wife who was battling with MS. They had no children. They have no close relatives to be able to help with her as her medical condition got worse over her life. Eventually, she needed full-time care in our house. She hired a caregiver, and after a few months of working with his caregiver, they made an arrangement to reduce some of the compensation by giving her free rent in the client's house. They had a great relationship. Eventually, the caregiver's daughter was also moving in. It was a perfect harmony. My client was happy to have the company and the care.

Richard:

Now, fast forward a few years more, the caregiver called me up and said, "Hey, your client wants to change the beneficiaries to me," and I was like, "Whoa, I need to talk to the client," and I spoke to the client and she said, "This is what I want to do." Now, this client had no mental diminished capacity, she knew exactly what she wanted, but this did send up flags for me because there is a type of elder care abuse where someone is dependent on their caregiver. Without that caregiver, it could be the difference between life and death, so I was a little nervous about this. I told the client, I said, "Look, I need to take certain steps to protect myself and also to make sure I'm protecting you."

Richard:

I was able to arrange a phone call with our legal department at my broker-dealer with the client and the client's sister who lived many, many, many miles away and have not seen her for many years, so on that phone call we discussed, "Is this really what you want to do?" I wanted to make sure the sister heard this because I didn't want any chance of the sister coming back and saying, "Well, the caregiver pressured my sister to do this. This is not fair."

Richard:

At the end of the conversation, all parties agreed that this is what the client's wishes were and we all agreed that it wasn't under any distress or anything and we made those changes and eventually, the client did pass away. The sister, in the meantime, sent a letter to us acknowledging our phone call, acknowledging that she wasn't going to be the beneficiary, and she didn't have a problem with that. When the client did pass away, the assets did get transferred over to the caregiver. I know the caregiver had that special relationship with the client and it meant a lot to both of them.

Richard:

The second case was just more recently. This was with one of my advisors who had a client for many years and the client called out of the blue for a distribution, which was a lot more than normal, and the advisor started asking questions, "What is this money for?" The client responded back saying, "My daughter needs some money to help her out from a situation." The advisor took his notes, made sense, and processed the withdrawal. The money went directly from the investment account right to her bank account.

Richard:

A few days later, the client reached out directly to an annuity company and took out even a larger withdrawal. The annuity company did process the withdrawal, but the advisor noticed this. Why would the client be calling the annuity company directly and not him for this money? It sent up red flags, so he reached out to me, we reached out to our back office, and we started asking more questions. When we started talking to the client, the client understood why we were asking these questions, she knew that they were not normal, they were out of the blue, and that we were asking these questions to protect her.

Richard:

When we started talking to her, she starts talking about winning a Jamaican lottery and that they require the taxes to be paid upfront. I started asking her questions about, "Did you enter a Jamaican lottery?" No response, kind of blank, air on the phone call there, and we started digging more and more into this. We were able to put the account on hold, freeze for any withdrawals, and we explained to the client that we have to do our due diligence to make sure what she's requesting makes sense and it's for her benefit.

Richard:

Fast forward, over many, many phone calls over just a short period of time, just a few days, actually we were able to get the state involved, we were able to get our back office involved. We tried to do more research. We found out the money she was wiring from her bank account, we got bank statements from the client, was going to this individual, and when you started Googling this individual's name, it's a known scam, which is out there with this name, so we try to explain this to the client. Then the client was getting irritable, asking every day for the money, "What's the status? This is not fair. This is my money," and so forth.

Richard:

It wasn't just us as the investment advisor in our back office, feeling that she was taken advantage. I said we got the state involved for Adult Protective Services and they also felt that there was issues, so ultimately, we did not do the withdrawal. We did notify the annuity company of possible fraud. Our company was working on... Again, this is just recently, I mean, we had to tell the client point blank that we are not going to be sending the withdrawal out and that we needed to work going forward to get a power of attorney, we needed to get a doctor's note saying that she has mental capacity.

Richard:

What's interesting is I've done a lot of studies on elder care planning and one of the things we learn is people who do have early-onset dementia or Alzheimer's is a lot of time in the morning, they're very clear, they understand what's going on, they can try to convince you that this is what they need, and then as the day progresses, as they get tired, you start hearing other stories about, "I need to pay the taxes for the lottery." In the morning, she's calling us and saying, "Why would I ever be taken advantage of a Jamaican lottery scam? That's the most foolish thing in the world." But she doesn't remember the conversation from the day before, which might've been later in the afternoon, where she was telling us that this was what the money was for.

Richard:

What are the things you should be looking out for when a client's calling you or coming in and then requesting something out of the unusual? Things which should stand out right away is a large withdrawal which comes out of the blue, something the client has never done in all the years they've worked with you, all of a sudden, they're used to taking out $3,500 a month, and now they need $75,000 from their account. You should start asking questions and while you're asking these questions, just like any other conversation with a client, you better be taking detailed notes because anytime anything ever gets brought up for investigation or a client complaint, the first thing they're going to ask for is the advisor's notes, so be prepared to take notes and make sure they're very detailed.

Richard:

Large withdrawals, that should stand out for you. You should be asking questions, "What is this withdrawal for?" When they started talking and they're explaining, "Oh, I have a child who's in financial problems right now, I need to help them out," you've been working with this client for a while. Has the child ever had financial problems before in the past? Have they ever bailed them out? If not, you should be concerned. Maybe the client is using that as an excuse or maybe that child is taking advantage of the parents. You should probably start asking more and more questions, get your back office involved, call your direct supervisor for their opinion, but that should stand out right away as a concern for you.

Richard:

The other thing is they requested a check and the very next day they're calling you, or two days later, they're asking you, "Hey, I haven't got the check yet. Where is it? I really need it, I owe taxes," but it's the middle of November. That doesn't make sense, and also, they know normally, they should know, that a check doesn't get sent and received within 48 hours. That's not normal. Usually, we're telling the client, "Expect the check in seven or 10 days," so if they're requesting money and they're calling up every day or every other day concerned where the check is, that should be a problem. The other thing is with checks or wires is a lot of times they're saying, "I never received it. Where is it?" Again, if it was just the next day, that's one thing. But if they're calling you two later and you're calling your back office and the check has cleared, but the client doesn't remember, that should send up flags to you also.

Richard:

If the client is coming out and asking for a large check for a purchase which doesn't make sense, I remember reading a story about a client who requested money to buy a Corvette at the age of like 82 years old and the advisor was concerned about it and luckily, they had a relationship with the client's son. They had documentation to share information and the advisor reached out to the son and said, "Whoa, whoa, don't do that. Please let me look into this," and when the son reached out to the father, the father didn't even remember requesting the money for a Corvette, so it showed the beginning stages of dementia, which is what ended up what this client had, and the advisor, by doing the right thing, having a trusted contact on file, reaching out to that trusted contact, asking questions, was able to prevent a large withdrawal from an IRA, which would have caused tax consequences for the client for money he didn't even need.

Richard:

Other things you should be looking out for is when the client's usually just getting a check and now they're asking you to wire or do a third-party check to a company or an individual and it's just out of the norm that now they're requesting this kind of withdrawal, you should start asking questions. Just like the client I mentioned earlier with that Jamaican scam, it was a wire directly to another individual to their bank, so that should also send up flags for you.

Richard:

A big thing is contractors working in elder homes. They start a project, the contractor is getting the feeling that this person isn't a hundred percent there, so they start increasing their costs or adding on different projects. If the client's calling you for money for those projects, you probably want to start asking questions, what they're getting done, was this planned, is this unexpected. Again, if you feel like there's fraud, your client being taken advantage, you probably should start putting flags on that account, going to your supervisor, asking for some help with this.

Richard:

Another thing you can start doing is when an elder client's on the phone and you feel that you're not sure if they're a hundred percent making sense, engage them in more conversation about their investments, about the past conversations. See if they remember everything, see if they have a grasp on the financial concepts of their own money. A lot of times, they're going to be confused and not even remember some things or they're going to start repeating things which just don't make sense.

Richard:

The other thing is if you have a client, you've had it for a long, long time, and all of a sudden, you see a ACAT being processed to move that account from you to another investment advisor, I would tell you to pick up the phone, call that client. There's a very good chance that that client went to a seminar with or was referred to someone or a cold call and that advisor got them engaged in the conversation and sent paperwork out to transfer their client's account to them. Your client may not even realize what they signed, they may not understand anything, so I would tell you that it's your responsibility as an investment advisor to protect that client and ask questions, call them and ask them: You've had a relationship this long, it doesn't make sense why they would be tranching the account without talking to you.

Richard:

Okay, so you're on the phone with this client, you're questionable about, does this make sense? Is there a possibility that the client might have a diminished mental capacity? Maybe there's some abuse going on, some influence from a family member, a religious leader, or just possibly a scam, like one of those tax scams: The IRS is calling you because you owe X, Y, Z about money, go to Walmart and send gift cards. You know that doesn't happen.

Richard:

What's the first thing you should be doing? First thing you do is you explain to the client, "Look, I want to process this request. I know that the money's very important to you that it gets in your hands, but unfortunately, there's certain things I need to do as an investment advisor because this is not the normal request you've done in the past. I need to go back to my supervisor just to get the okay to process this withdrawal for you. I'll get back to you as soon as possible." That's the first thing: Let the client know that you have to take some steps to make sure that this is a valid request and that it's in the best interest for the client to go ahead and proceed.

Richard:

Most likely, your supervisor is going to pass this to a department in your back office who specializes in elder care cases and they're going to start asking you a lot of questions, like the first thing they're going to say, "Can you pass me your notes? Send me your notes." I don't mean just the notes from the last conversation you just had with them, they're looking at the notes from the beginning of your relationship with them, they're looking for patterns, and then if this last request does not make sense in that pattern, they're going to start digging into more of it. The first thing they have the right to do is under FINRA rule 2165, they have the right to put the account on a 15-day hold, which will allow them to prevent any distributions coming from their account for 15 days.

Richard:

The very next thing your back office is probably going to ask you is, "Hey, Rich, do you have that trusted contact form on file for this client?" If you remember FINRA, they have a rule called 4512 they came out with a few years ago and they encourage that as investment advisors that we reach out to our clients who are 65 and older to get a form called the trusted contact form. If the client agreed to share with you, a person who is allowed to be contacted for situations like this, where you have to get them involved to double-check, or if you need to get ahold of a client and they weren't available, so hopefully, you have that form on file. If not, you need to go to the next step, but I will tell you that if you don't have the 4512, or you haven't started the process asking your senior clients to fill that out, I would do that right away. That form is very beneficial and a lot of times, it can nip the problem right in the bud right away.

Richard:

If there's belief that there is some abuse being taking with this older client or a diminished mental capacity, we're going to start asking more questions. We might go back to the client and say, "Hey, can you send me some bank statements?" or, "If you're really helping out the child, can you show me some of the bills you're going to be paying?" A lot of times, the clients are willing to do that. Other times, they're going to resent it and say, "This is my personal business. I don't know why you're asking these questions."

Richard:

At that time, most likely even if the client gives you the documentation, your back office is going to reach out to Adult Protective Services in that state. Adult Protective Services is going to open their own case. They're going to call the advisor, they're going to interview them. They're going to reach out to the client. They're going to ask some questions. A lot of times, they might even set up a follow-up call, so it's different times during the day, just to make sure that the stories match. At that time, then the Protected Services is going to get back to you and say, "Yeah, we agree with you," or, "No, we didn't really see any issues in this."

Richard:

The purpose of getting another person involved is we don't want to be the only person making that decision. We're questioning maybe the client's mental capacity. It's nice when you have another organization like Adult Protective Services on the call and doing their own research and coming up with the same answer. Most likely, your back office is going to notify FINRA of a possible case for elder care abuse. It's not that FINRA is going to start opening this big case, investigating you and making sure you did everything right. FINRA really wants to be able to track what's going on in our industry, making sure that the right actions are being taken care of to protect the investors, so be prepared that your broker-dealer might be doing that. You might get a phone call from FINRA to get some more additional information regarding this one case.

Richard:

Okay, so everyone believes that there is some abuse being taken on your client, so what do you think's going to happen? Well, we're going to have to reach out to the client or that trusted contact and explain to them that we don't feel comfortable at this current time just to allow the money to be disbursed for this reason. If it's for the mental capacity or possibly they're being taken advantage of a scam or something, we're going to see if there's a power of attorney they have. This way, we can get another party involved and to protect the client.

Richard:

If there's no power of attorney on record, that's the hard part. That's when the client's family or a close friend has to go to the local court and petition a judge to issue a conservator position to them. A little legal tip that people forgot: A conservative is someone to help with the financial decisions of another individual, whereas guardianship is somebody who helps another individual to make healthcare decisions, so for this, we're looking for the conservator. If the client comes back to you and is adamant that they have their mental capacities, they know what they're doing, we're probably going to request them that they go to their doctor and have a doctor examine them and give us a written report stating that they examine the patient and that they felt that there was no mental diminished capacity and they are in sound mind.

Richard:

To close this podcast, I want to go over just a few things real quick to sum it up. First is I want to read some stats which came from the United States Justice Department's website. First, "Seniors who experienced abuse are more likely to die earlier than seniors who weren't abused." Now, remember, these stats, aren't just talking about financial abuse. This could be any type of elder care abuse, being physical, financial, and so forth. Second step: "Seniors who have been abused are more likely to go into a nursing home." Third step: "One out of 23 abuse cases are reported." Just imagine, only one out of 23. Imagine if this was your grandma in a nursing home or working with a financial advisor and they didn't take the precautions to protect your grandma.

Richard:

Talking about protection, it's amazing. I never thought about when I sat down with a client, they expect us to protect their assets from being stolen or sent out to the wrong accounts. They expect us to manage the money properly. Did you ever imagine that part of our responsibility is not just to protect it from what the client expects, but also to protect it from the client itself? If there's any time you're getting a feeling that the client's being abused or diminished mental capacity, don't hesitate. Report it, do something about it. Again, one out of 23 cases are being reported from what the United States Justice Department reported. That could be that your client has talked to an advisor and the advisor just took the easy way out and just processes the request. Don't be that advisor, do what you're supposed to do: Protect the client.

Richard:

More important, anytime you're talking to a client, I don't care if they're a senior or not, the most important thing you can do is document the conversation, take detailed notes, your recommendations, what the client requested. Make sure that you go over tax consequences when the clients are asking for withdrawals. The more detailed the notes they are, the better you'll be as an advisor if anything ever comes up like this.

Richard:

Thank you so much for listening. I will tell you what the next two episodes are going to be about. One is going to be from a vendor I use, which is a software program who... Actually, I've been talking about notes all this time, but it's actually a software program which helps advisors to take their notes and organize them and actually make micro templates. I'm really excited about having him on the next episode.

Richard:

Then the other episode which is planned is if you remember in the trailer, I mentioned there was an advisor I spoke to about 15 years ago and he said something which was the reason why I decided to start this podcast, so I'm going to have him on the call and we'll interview him. We'll talk about how he felt that day when he made that comment and where he is 15 years later. Thank you so much for listening.

New Speaker:

Thanks for listening to The Financial Planner's Desk podcast. Feel free to share this episode with colleagues and other financial professionals in your life and make sure you don't miss an episode. Subscribe on Apple, Spotify, Google, or your favorite podcast app.

New Speaker:

Richard Oring's branch office is 1 Airport Pl, Princeton, New Jersey 08450. The branch phone number is (609) 924-2049. Securities offered through Royal Alliance Associates, Inc. member FINRA SIPC. Advisory services offered through New Century Financial Group, LLC, a registered investment advisor, not affiliated with Royal Alliance Associates, Inc. New Century Financial Group, LLC and Royal Alliance Associates, Inc. do not offer tax advice or tax services. Please consult your tax specialist for individual advice. We make no specific comments or recommendations on any tax-related details.