Issues involving seniors and their guardians can sometimes present problems for financial advisors and their elderly clients.

“We are seeing financial exploitation of the elderly by court-appointed third-party guardians where there is little oversight,” said Debby Valdez, president of Guardianship Reform Advocates for the Disabled and Elderly in San Antonio.

The problem is exacerbated by a reported rise in guardianship cases. In a survey conducted by the Center for Elders and the Courts, 37% of judges, court managers and clerks who responded said guardianship filings have increased over the past three years.

Often it is a child or other relative who is appointed as a guardian when an elderly person can no longer manage his or her own financial affairs. However, 78% of abusers of the elderly are a spouse, child or another relative, and almost one in four victims is age 86 or older, according to a 2013 Department of Aging report. “When dementia comes into the picture, it further complicates the situation,” said Stephen Moses, president of the Center for Long-Term Care Reform in Seattle.

 “I can see the conflict of interest with the financial advisor when a guardian is appointed because they are managing a substantial amount of money and they are being crowded out by way of a third-party guardian,” Moses said.

Guardianship is a fiduciary relationship created by state law in which a court gives one person or entity the duty and power to make decisions for another person. Guardian duties can include arranging care for a person, as well as managing and investing her assets in her best interests, and using the income and principal to pay for her comfort.

The powers a guardian has can vary among states. “In Illinois, the Probate Act governs what investments can be made for an elderly person who is found to be incompetent,” said Kerry Peck, a Chicago-based elder law attorney.

Financial advisors may find guardianship employment opportunities themselves or through a bank or estate planning attorney.

Guardianships may represent an opportunity for advisors, but they are not without risks. “This is an area that financial advisors could expand into; however, the whole area of guardianship is fraught with potential problems, ethical and otherwise,” Moses said.

That said, advisors may be well-suited for the task. “Financial advisors have a specialized knowledge in managing a ward’s livelihood, and there is a lot of trust and confidence put upon them to carry out the financial wishes of the individual,” Peck said.

“We work with stand-alone financial advisors who are often engaged to manage the assets of a guardianship,” he continued. “They have the experience and resources to provide a clear financial outlook and run a budget analysis to prevent the depletion of assets. Financial advisors play an integral role in assessing the projected return on investment, which will be used in a very important manner—i.e., a determination as to the resources available for the care and housing of the disabled ward.”