After a longtime client in her early 80s lost her front-door key for the umpteenth time, started buying pricey jewelry and got bilked out of $10,000 for simple tree work, Washington, D.C.-based investment advisor Alexandra Armstrong unleashed an ally who is fast becoming a critical partner in her work with senior clients. Armstrong, a veteran advisor and the chairman of Armstrong, Fleming & Moore Inc., persuaded her client to hire a daily money manager to help track and manage payments, bills and expenses.
It was the daily money manager who discovered the client had just bought a $100,000 necklace. "It seems a local jeweler was visiting the client at home to make sales," Armstrong says. "She only has $1 million to live on, so I was already lying awake nights thinking, 'My God, she's going to run through this money.' Thankfully, the daily money manager caught it." She called the client's attorney-trustee to report the purchase of the six-figure gewgaw. The attorney promptly returned the necklace to the well-known D.C. jeweler with a stern warning that no future jewelry, no matter how dazzling, would be paid for.
I guess my question is simple: Will the rest of the securities industry-advisors and stockbrokers alike-be an Armstrong or will they be a greedy jeweler?
Because the issue of aging investors isn't going away. And my fear and the fear of a cadre of regulators and consumer advocates goes beyond the advisor or rep who isn't proactive with client care. It drives at the darker areas of human behavior, where a senior's entire nest egg could be repeatedly traded or where somebody can sell unnecessary, pricey products. All because the client could be easily duped.
Armstrong's experiences with her senior clients are becoming commonplace, acknowledge a bevy of advisors and aging experts, who report seeing an uptick in the number of vibrant and often savvy investors who change, in some cases almost overnight, into vulnerable individuals with diminished mental capacity. More than 14% of Americans-5.4 million senior men and women-have some form of dementia or Alzheimer's disease by age 70, according to a 2007 NIH study. That means one in seven seniors is struggling with impairment. The number of seniors who are impaired climbs to 20% when individuals hit age 85 or older. The AARP says that half a million folks 50 years of age or older already need assistance with their finances. With 75 million baby boomers marching into their so-called golden years, the number of at-risk senior investors is a notable and worrisome trend.
"Supposedly one of the first things to go is your grasp of financial affairs and your ability to deal with simple financial matters," says Armstrong. "You have to know what to watch for with clients. Even if you don't think it's your job or role. Sometimes I don't think it's my job either, but some of my clients have been with me for 20 to 30 years. They're friends."
Having known Alex for more than a decade, I'd be hard-pressed to imagine she'd turn a blind eye to clients in need. She discovered the $10,000 tree swindle herself when she was attending her client's 80th birthday party and got wind of it from a concerned neighbor. She has a close relationship with the folks she works for and it becomes closer, say her staff, as clients age or become widowed or infirm. In fact, she has put a number of proactive practices in place for senior investors to ensure that no one who takes a turn for the worse slips through the cracks at her firm. Repeated questions and odd behavior of any kind are put into the firm's customer management system, so that all of the staff members have a big picture of client behavior. When evidence of troubling impairment surfaces, Armstrong or one of her two partners will talk to clients and call spouses, adult children, caregivers and trustees to find out if they're seeing the same deterioration and taking steps to help.
Armstrong is also very big on persuading ailing clients to use daily money managers, who will help clients go through the mail, write checks, pay bills, balance checkbooks, make bank deposits and organize tax and financial records. Many managers are trained to look for fraud and financial abuse. Remember, that's how Armstrong found out about her client's $100,000 jewelry spree. "I think using a manager like this is a saving grace that helps everyone stay on top of the client's financial picture," says Armstrong. To find a daily money manager in your area, look on the American Association of Daily Money Managers Web site (www.aadmm.com).
Would all advisors and our big, raucous securities industry at large look out for their clients in ways such as these? If someone manages a senior client's money without a financial plan, or works solely as a stockbroker, selling funds and variable annuities, would these same people go the distance to ensure that family, friends or legal counsel are called when a client exhibits some form of impairment? Or will they be the opportunistic jeweler, who is happy to make the $100,000 sale?
I'm hoping that stockbrokers and money managers are more altruistic, like Armstrong, and less in a hurry to close deals. Some of the legal and arbitration complaints at FINRA and the Securities and Exchange Commission suggest that advisors can more often be the latter.