Financial planners can do a lot of things to help secure the financial belongings of the elderly. One key to doing this is transparency. With so many family members spread across the country these days, it is difficult to see what is happening physically at a particular location. However, it is easy to provide viewing privileges or access to information about a financial account to multiple people, regardless of where these people reside.
It is usually a simple matter of establishing proper authorizations for all of the siblings in a family to see what money is coming in and out of mom’s account. There is some potential, to say the least, for squabbling siblings to derail this process. However, these days we are finding that even in families where siblings do not get along well, they are aware of the reality of the potential for fraud and are generally receptive to the idea of open books. Mom often is aware that keeping up with her finances is increasingly difficult and is open to the idea, too, typically as long it is clear she can still call the shots for as long as she is able.
Sure, in some families this discussion will go nowhere, but most families will benefit from giving them the chance to set their disagreements aside for a time to make sure that mom is protected. Having the conversation can also deter the most prevalent exploiter of all, one of the kids.
Most financial planners have had the experience of working with a widow who, after her husband passes away, is being hit up for cash by one of the children. We can help establish trusts to control funds so troubled family won’t squander assets, but the simple act of getting more family eyeballs on the situation often keeps children from even asking mom for funds the child would never have asked of dad. With more people involved there is, of course, a greater potential for conflicts of opinion, but to me the lower potential for exploitation compensates for the discomfort.
Discomfort is a good word to use. In conversations with colleagues, the very idea of having these kinds of conversation makes them uncomfortable. I want to encourage my peers to, well, get over it. Financial planners can play a huge role in improving the security of our elderly by simply doing a good job and encouraging better communication among a family.
One of the most common drains on elderly finances isn’t outright fraud, it’s the sneaky effect of lousy but legal products. A less confrontational way of deterring any one close to an elderly person from preying on the elderly’s generosity is to give the family a crash course on how to spot crappy products. This works because you are pointing the finger at outside sales people, not family members. Because poor products are pitched the same way as frauds, by establishing a process by which all products must be purchased, we create an environment that makes selling bogus or poorly conceived investments more difficult.
Red flags we cover include, in no particular order:
• A presentation riddled with a great sense of urgency. Truly good deals respect the need for due diligence.
• Failure to provide complete disclosure, financial statements, business plans or other due diligence materials rapidly.
• Claims can’t be verified independently.
• High returns with low risk.
• Vague or downplayed costs
• Lack of transparency. Post-Madoff, more people are becoming aware of the importance of third-party reporting.
• Name dropping. Another way to encourage letting one’s guard down and skip on due diligence
• Insistence on confidentiality. “This is a special deal so don’t tell anyone or you might get shut out of the deal,” or “I could get into trouble with my boss,” or “Mom, you know my sister won’t like it.”
A scammer is not likely to succeed if most of the family and the family’s financial planner are tuned into these warnings signs. Junior isn’t likely to approach mom for start-up funds without a decent business plan.
It works. At our firm, we are the primary gatekeeper to the funds of our clients. Have the latest and greatest thing, do you? Great. Funny thing happens when clients direct the purveyors to us. The pitchmen take their funny business elsewhere.
I am not suggesting you make this holiday season an occasion to start family squabbles for all your clients, but I do want to encourage you to start the conversation where you can. A good financial plan with an appropriate portfolio in place with several competent adults watching the funds through third-party reporting is a strong defense for an elderly person’s assets and planners are well qualified to provide that defense.