The case of a California insurance agent, whose conviction for theft was overturned by a state appeals court last week, has implications for all client-facing financial professionals, according to the Society of Financial Service Professionals (FSP).
The situation points out the need for financial professionals to document their work with elderly clients, even if that means recording every meeting, says Richard M. Weber, immediate past president of FSP.
Weber warned during a webinar, sponsored by FSP and the National Association for Fixed Annuities, that any financial service professional could be sued for improperly handling a client who eventually is shown to have dementia. He offered advice on precautions that advisors and others can take to limit their exposure.
The warnings grew out of the case of California insurance agent Glenn Neasham, who was convicted of felony theft for selling a $175,000 fixed indexed annuity in 2008 to an 83-year-old woman, who was later found to suffer from dementia. He lost his insurance license because of the 2011 conviction.
The conviction was overturned by the California Appeals Court in San Francisco last week. The court said Neasham did not take anything from the woman by selling her the annuity, which a son later turned in for full value. It also said the prosecutor would have to show intent to prove theft and the mere fact that a practitioner may fail to notice dementia at the time of a transaction does not constitute theft.
Despite the fact that the conviction was overturned, the original situation shows how any financial professional can be caught up in similar circumstances, FSP says.
The appellate ruling “is a significant win for Neasham and a reprieve for the insurance industry, but this may still leave fee-for-service professionals vulnerable since [in future cases] the allegation presumably would not be theft but failure to provide advice appropriate to client circumstances and ability to measure the consequence of their decisions,” Weber says.
“There are still important lessons to be learned,” he adds. “Not just defensive approaches to dealing with a client’s cognitive ability, but to be able to be proactive for the benefit of the client.”
To avoid problems, Weber advises practitioners to ask older clients a series of standard questions each time they meet to try to determine their competency. He also suggests having a relative or friend of elderly clients sit in on the meetings.
When discussing different products, he suggests asking the client to tell what they think the product does. He suggests practitioners record meetings and give the client a copy of the recording.