Advisors Must Lead On Protection Of Elderly From Financial Abuse

Financial advisors may have to take a more active lead in the prevention of financial abuse of their elderly clients in the future, says Wilmington Trust’s Jonathan Fitzgerald.

As the large wealth transfer occurs over the next two decades from aging baby boomers to their heirs, “the big focus is going to be on the larger role the advisor, as well as the family members, must take in preventing both financial and physical elder abuse,” says Fitzgerald, director of wealth and fiduciary planning for Florida for Wilmington Trust, a nationwide trust and financial services firm.

“It is an unsettled question that is out there: How much responsibility should a financial advisor have for preventing elderly abuse? But advisors see their clients once a quarter, more than the attorneys or the CPAs, and they can see if anything is wrong with the finances,” he says.

Some cognitive impairment of financial decision-making can start in a person’s 60s and accelerates in the 70s and 80s, Fitzgerald says. Planning for this eventuality should begin in the client’s 50s.

Awareness of financial abuse has drastically escalated over the past decade, Fitzgerald says. “A decade ago, estimates of financial loss from elder abuse were set at $2 billion a year. Now we realize it is more like $30 billion or $40 billion.

“Older clients need a team to watch out for the problem and the team should include the family and the financial advisor, as well as the accountant and attorney,” he says.

Combine the growth of the problem and the growth in the aging population and the problem will escalate further.

“The common denominator for financial and physical abuse is that people start planning too late. Once there is a problem, it is too late,” Fitzgerald warns. “It can be an uncomfortable conversation for the financial advisor to start.”

One solution is setting up a revocable trust, which makes it easier to deal with a problem than having just a will and a durable power of attorney. If the family cannot or will not handle the issues, then the trustee and the advisor can deal with it.”