In last month's column, I asked to what extent financial planners had seen elder exploitation and asked if anyone would share their stories. This month I want to share some of these situations and point out a few themes.

Planners who attempt to help are clearly frustrated with the inadequacy of options and services. For example:

Last year, a person whom I had known for years came to me to prepare his returns. I had not seen him in many years and was shocked at what I think are obvious signs of dementia. During the interview he mentioned borrowing a substantial amount of money on his home and loaning it to a needy veteran that was making some type of claim and would be paying the money back soon. I was very concerned about this situation. I contacted the AICPA and our state board of CPAs and did not receive an adequate answer. I am in a dilemma as to what to do.”  — RH

Or this story:

Husband has a stroke and loses his judgment faculties. Husband starts soliciting prostitutes at their home and his mother's residence. Husband acts in other ways showing very poor judgment. Wife obtains a judgment protecting her “share” of all of the assets, some of those being a portion of her husband’s retirement accounts. Husband now has his assets segregated. Wife has told me that prostitute activity has remained constant and that he wants to withdraw his funds to loan to those prostitutes.

I contacted my B/D legal and compliance department about the situation and was told by them that without a conservatorship or similar judgment, I am required to do what the husband requests. Husband now has withdrawn the majority of his retirement account. I have little doubt all of his assets will be gone soon. — CS

I received several notes decrying how some firms basically ignore the issue, like this description:

I have dealt with everything from an insurance agent 'friend' who moved in with an addled recent widow to sell annuities, to a client who drained her substantial retirement funds over six months taking a weekly bus trip to the local Indian casino. The first ended well with the court getting involved due to her daughter's vigilance, but the second ended with what was left of her account being sent to be covered by our call center. In both cases, I was told by my large wirehouse compliance officer that there was nothing we could do.  — TM

Government entities can be just as unhelpful.

In January 2006, I tried to help the elderly parents of a client, to whom I believe were sold an inappropriate annuity by an insurance company agent (86 years old, put in contract with high surrender penalties when clearly they needed cash flow).

The State of New Jersey responded to my client’s parents in a letter that the “Statement of Understanding” which they signed, and contract, indicated that they were given proper legal notice. The letter also said,  “the New Jersey Department of Banking & Insurance is an administrative agency and is not empowered to overturn the terms of your contract.” It suggested legal action.

From this experience I learned that, at least in this instance, the insurance company and State of New Jersey had no interest in correcting this wrong, and only legal action, which was beyond the means of this couple, might have worked. They were financially naïve and easy prey for the agent. This process was beyond their financial means and level of energy at their advanced stage of life. And so the abuse continues.

I did all I could do, with no relief for two unsuspecting targets. — DH

Let us not forget that nonfinancial assets can be targets as well.

Our firm deals exclusively with the documentation of nonfinancial assets of every type. Imagine the disappearance of single (or a few) items from a collection (no one will notice ... ) or some small items of unusual value like jewelry. These events may ultimately destroy entire family relationships with suspicion and hatred for their dishonesty. — JM

Some scenarios ended with a decent outcome.  Another “JM” was kind enough to take the time to share several stories. In this one, the result was good because she could talk with a responsible family member.

An elderly female client would sometimes call and was obviously confused. Her daughter lived with her. I noticed checks payable to the local grocery store being written against the mother’s account on a daily basis. Her daughter would go to the store daily and use a check to get cash. She also mentioned that the son would take his mother to the local bank, and she would draw out funds for him. Because he was there with her in person, the bank tellers complied. Her second adult daughter had POA (power of attorney), and I discussed these items with the daughter. I am sure that the son would have depleted the client’s assets without any regret in a very short time had he not been blocked by the court action. — JM

In this story, however, a bit of luck was needed.

I had a client who showed obvious signs of cognitive impairment. I followed up by writing a letter to her suggesting that she and her family contact an attorney to set up a trust account with a corporate trustee to manage her finances, as I felt that her situation warranted a higher standard of care and greater protection. Her family knew that she had been diagnosed with a neurologic disorder that would progress, but I was not aware of this until someone from the family contacted me regarding the letter I sent to the client. (She was living with them while waiting for an apartment to become available.)  The client decided to follow my suggestion. — JM

Here, the tactic from BK was to drop a hint.

Years ago our CCO got a call from a client who wanted to send money to Nigeria. It was her money and he cannot refuse to give her her money.  Being concerned, his question was one of client’s rights over what is right. I believe it was suggested the rep call one of the beneficiaries to “update” information and indicate the beneficiary call his mother to discuss her assets and goals. All went well. — BK

Here the planner identified a way to find out what was going on.

One of my clients recently asked me for help with a friend of hers who she feels is being controlled by ‘aides’ that are at her house daily. I suggested that my client contact the NJ Senior Services department with her concerns. They will set up a physical appointment with the woman to assess the situation, and I’m sure that they will reach out to the son. — JM

These stories, and others I did not share here, tell me a few things. First, the quantity of responses lead me to believe it is unlikely you can practice financial planning and not encounter such situations. Second, the length of some of the tales (I edited all of the above to accommodate my word count limit) means people were passionate enough about the subject to take the considerable time needed to compose the e-mails to me. It is painful to see good people taken advantage of.

I was also struck by how family can be a great help -- or the perpetrators.  Also, the “authorities” can do a better job than they are. In these examples, a state board of accountancy, compliance departments and state insurance departments were all unable or unwilling to help.  Last, if these cases, in which exploitation is clear to observers, are so difficult to address, what hope is there for less obvious situations? Things are not always as they appear.

As JM puts it:

My own mother has cognitive degeneration, and I do not take everything she says as the exact truth. She often misunderstands instructions or appointment arrangements. She does not recognize the difference between a current bill and one that is from two years ago. Yet if you met her in the supermarket, you likely would not realize anything was amiss. I believe that in most cases it takes continued interaction with an individual over time to truly recognize when action is necessary.
 
What are planners doing to try to be better equipped for cognitive decline in clients? TD summed up the most common approach.  “We're taking steps to have clients provide guidance to us on how to respond if we think there are competency issues. Not sufficient, but a start.”

I agree.  If you haven’t started, you should get moving.  These issues will only become more common.

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 [email protected]