An ounce of prevention is worth a pound of cure. This classic adage is applicable to many aspects of life, and elder financial abuse and exploitation is no exception. My column last month focused on simple steps to help prevent the fleecing of our elderly.

This is a growing problem in America. With lifespans increasing, it is likely to continue. The Elder Justice Act, passed as part of the Affordable Care Act, allocates funding for elder abuse programs, and the new consumer protection agency has a unit dedicated to senior services. States across the country are getting more active in protecting seniors.  

Financial professionals are squarely at the forefront of the effort because fraudsters aren’t after our clients’ knickknacks. They want the money. A recent report estimated that the elderly are taken for almost $3 billion annually.

Greg Olsen, acting director of the New York State Office for the Aging, gave testimony to the New York Assembly standing committees on aging and banks on December 11. He said, “The consequences of financial exploitation can be far reaching: It may force older adults to forgo meeting basic health and safety needs, to prematurely rely on public benefits such as Medicaid and other public benefits for needed care or daily expenses (housing, food, utilities), and ultimately assets may no longer be available for home care, long-term care or other daily living needs. There is also a significant impact on the individual’s mental health, and many are wary of coming forward in fear of having their independence taken from them.”

Having proper documents and authorities in place, fostering transparency and third-party reporting, and having a team of true professionals looking out for a client are all good steps at preventing problems, but problems will occur nonetheless. Then what?

In a terrific interview in the Winter 2012 issue of The Wealth Channel Magazine, an American College publication, Dr. Sandra Timmermann, executive director of the MetLife Mature Market Institute and chair of the board of the National Alliance for Caregiving, does a great job of outlining the scope of the problem and many issues related to combatting it.

She also says, “If the advisor suspects there is something wrong, either physically or cognitively, or if they think that someone has been a victim, it’s imperative for them to do something about it.” Timmerman offers some reasonable suggestions on what to do. For instance, if there are clear signs of physical abuse or a theft, call the police. I agree with her, as I suspect most professional advisors would. It seems like a perfectly natural thought.  

However, I found myself frustrated when I looked at the profession’s ethical codes and the regulations that typically apply to advisors. I may feel calling the police is what I am supposed to do, but do those that regulate my business behavior agree? What about less clear cases, like when I simply suspect a client’s mental capacity may be slipping?

CFP Board’s Code of Professional Conduct offers some information.  What follows are a principle and a rule that are really good but aren’t necessarily much help:

Principle 5 -- Confidentiality.  Protect the confidentiality of all client information.
Confidentiality means ensuring that information is accessible only to those authorized to have access. A relationship of trust and confidence with the client can only be built upon the understanding that the client’s information will remain confidential.

Rule 3.1 -- A certificant shall treat information as confidential except as required in response to proper legal process; as necessitated by obligations to a certificant’s employer or partners; as required to defend against charges of wrongdoing; in connection with a civil dispute; or as needed to perform the services.

So, your client’s son, Junior, calls to say mom wants him added to her account. You have her permission to discuss the matter with him. You explain the pros and cons and suggest they run this by the attorney who drafted the living trust in which her assets are currently titled. Two days later, mom calls and says she appreciates the information, but they want to put the funds in a joint account. They don’t want to pay the attorney any fees and doing this will make it easier to get her bills paid. You explain that getting bills paid can be handled via the trust pretty easily. She thanks you and leaves things as is.  

A month later, a transfer form comes in and the assets go out. Your client only says that you are sweet and she appreciates all you have done, but Junior thinks it is best to transfer since you won’t change the titling. Suspicious? Heck yeah. Now what? Can I call someone? Should I call someone? Who exactly?

There is no legal process, no obligation to an employer, no charges to defend, no civil dispute, and you won’t be providing any services now. It is legal to ignore an advisor’s advice. It is legal to retitle assets into joint ownership. If the client hasn’t given permission to share information with anyone else, what can you do?

In many states, in some lines of work, state law mandates the reporting of suspicious activity. For instance, doctors that see bruising must report. Counselors that learn of abuse must report. Bank personnel in many states must report suspicious activity.  

Last year, the financial services media paid a lot of attention to the conviction of Glenn Neasham for criminal theft under California’s elder abuse laws when he sold an annuity to an 83-year-old woman. How could a person get a felony conviction for selling a product California deemed legal? The case is on appeal so there will be more to the story, but for now I will highlight a couple of relevant points in the case.  

First, an investigation was initiated because a bank employee filed a report to the Lake County Adult Protective Services offices. Under California law, banks are required to report suspicious activities and the bank employee felt the lady, Fran, was under the influence of her friend, Lou, who was beneficiary of the CD funding the annuity contract and also would be beneficiary of the annuity.  

Neasham contacted the bank to assure the bank that the product was legitimate. This didn’t change the bank’s uneasiness about Lou. The insurance investigators from the State of California determined that Fran was not competent to enter into the contract.  This assessment was made after the fact, and Neasham appears to believe her capacity was adequate at the time she bought the annuity. However, Neasham also seemed to have some reservations about the transactions since he had Fran and Lou sign a “CYA letter” when he delivered the policy. This letter seemed to have hurt more than helped Neasham.

This is an odd case. Neasham was convicted for felony theft under California Penal Code Section 368(d) for a matter almost always handled through civil courts or Finra arbitration. A client’s mental state would certainly be relevant in either of those venues, but this case and the proliferation of elder financial abuse and exploitation begs the financial planning profession to establish more clarity about our obligations.   

Sure, it would be easy to write off Neasham as yet another annuity junkie who would cut corners to collect a $14,000 commission, but even us planners that never work on commission are faced with the challenge of aging clients and issues that go along with that. I could not find a regulatory body that has outlined a process for assessing a client’s mental state. Nor could I find any indication of a legal imperative for advisors to make such an assessment. Should there be one?  

Morally, it seems we should be looking out for clients, but how exactly?  Should we have an affirmative obligation to report like a doctor or a California banker? Should you be calling anyone in particular when Junior shows up?

As it is now, the Neasham case suggests that we may be held to a standard that hasn’t even been put in place. We need to know in advance what our obligations are. It will be challenging, but we should establish our own standards before they are thrust upon us. The standards should protect our clients as well as our practices. After all, we are on the same side of the issue.

My new year’s wish is that the profession will engage in a dialogue about the standards that should apply. Do you have an elder fraud story? Do you have an opinion about what such standards should be?  Please share them so we can do a better job of addressing this critical need.   

Dan Moisand, CFP, has been featured as one of the America’s top independent financial advisors by most leading financial advisor publications. He has spoken to advisor groups on five continents on topics such as managing investments and navigating tax complexities for retirees, retirement readiness, and topics relating to the development of the financial planning profession.  He practices in Melbourne, Fla.  You can reach him at (321) 253-5400 or