Sadly, financial elder abuse is a reality. And with increasing wealth and longevity it’s becoming a more frequent reality. The Victorian State Trustee has created some useful information that can be accessed here: Victorian State Trustees and Elder Abuse. I recommend you read these materials, and similar materials, and generally acquaint yourself with these serious issues. These materials include guidance on how to prevent and report elder abuse. Financial planners, as their clients’ trusted advisers, have to deal with elder abuse in at least two ways. These are:
- being vigilant on behalf of your elderly clients to help make sure they are not victims of elder abuse and
- observing higher than normal standards of propriety and probity with elderly clients, to ensure advice is clearly in their best interests, is appropriate and understood. And making sure they can show FOS or ASIC, and me, as Dover’s Responsible Manager, that this is the case.
Guidelines for dealing with older clients
Financial planning advice is all about advice that is genuinely in the client’s best interests and is genuinely appropriate to the client. Follow these two rules and you will not go far wrong. Ignore them at your peril. Older clients are not exceptions. Your advice must be genuinely in your client’s best interests and must be appropriate to them. Every client must be able to understand your advice. And you must be able to prove they understood it and that your advice was expressed in terms your client was likely to understand and in fact did understand this involves two different tests). You should read FOS’s Approach to the Adequacy of Advice and note its case studies dealing with older clients. The bar is high. Make sure you get over it. The obvious issue is mental capacity. If you have any concerns at all about your client’s mental capacity you should not provide any advice until you have competent instructions from someone acting for your client, for example, instructions from an adult child acting under a valid power of attorney. I think the key to dealing with older clients is making sure they really understood your advice, and that you can prove they understood it. How do you do this? In short, by being very conservative and very cautious. You must assume your SOA will be read by a skeptical judge or FOS Case Manager, and you must be able to prove you did everything a reasonable financial planner would do in the circumstances. In practical terms this includes:
- not acting for your client unless you are 100% certain all is in order and, in particular, you are confident that your client has full mental capacity and understands your advice
- making your advice even simpler than usual
- making your advice even more conservative than usual
- involving adult children and other appropriate persons such as your client’s accountant and solicitor in your advice, or perhaps even their doctor, with the consent of your elderly client
- heavily documenting your approach before you provide your SOA to your client, even more than usual, emphasising e-mails to relevant third persons including your client’s children
- making sure Dover’s compliance team is very aware that you are providing the advice (bear in mind from 1 September 2015 every SOA has to be checked by MLA Lawyers before it is sent to the client. No exceptions) and
- being particularly prominent with your fee disclosures and other information to make sure you are not accused of over-charging or not disclosing a conflict of interest.
Ask yourself “how would I like my 85 year old mother to be treated?” And then do more than that.