Many of us built careers serving the “The Greatest Generation.” The Depression forged their work ethic and diligent saving habits and, once they warmed to the idea of turning money over to someone the age of their grandchildren, we were rewarded with decent, loyal clients.
But the satisfaction of working with these clients is now often tinged with heartbreak, as we witness firsthand the inevitable decline in their physical and mental well-being. Professionally, our duties are not affected much when a client's physical condition deteriorates. When the mind goes, however, we have to make sure that the money does not go with it.
Decisive action in the face of a client's loss of lucidity can make all the difference in how his savings are protected. Here are some steps you can take to help clients in their time of need, while cementing your position as their advisor of choice.
Find it all.
The first step is to get a written inventory of the client's entire financial picture at the first sign of mental slippage. Don't stop at CDs and stock certificates — wills, deeds, insurance policies and benefit statements also should be included. Get purchase dates and cost-basis data, if possible.
Send that information to an attorney for review. The will is the first issue to address, but estate planning and powers of attorney also need to be considered. This is also the time for the client to consider financial gifts and their potential effects on taxes and eldercare financing.
If the client is a man of a certain age, it is likely he made all his family's money decisions. It is your job to gently suggest that he share the reins. His spouse is obviously a good candidate, but, depending on her past involvement in financial affairs, you may have to spend time going through “Personal Finance 101” with her. Single clients might already have named an adult child as a financial administrator, but they often will need your help to formalize the designation. You must also set up a meeting with the administrator-to-be as soon as possible. Developing this relationship is crucial to keeping the assets with your practice.
Protect your client.
The combination of a healthy body and a deteriorating mind can prove costly — with full-scale institutionalization expenses in the five-to six-figure range annually. How many clients retirement plans are projected to throw off that kind of income? Assuming the client is insurable, a long-term-care policy can prevent this tragedy from depriving the family of financial security. If the older generation cannot afford the premiums, the adult children may want pick up the tab instead. Medicaid will pay for some care, but the level is so minimal that reliance on the government should be considered as a last resort. (Find out more at www.medicare.gov.)
When the wolves come out.
Clients with declining mental abilities are ripe targets for scam artists (some of whom may be related to the unfortunate senior). Until a competent individual takes over as trustee or with power of attorney, you may be the only defense against such predators. Pay close attention to any aberrant financial moves. Document such movements, and alert involved family members promptly upon discovering them.
Serving as the advisor to vulnerable adults puts you squarely in the regulatory gun sights, as well. Extra care is required to reduce your potential liability. Document every conversation you have with the client and his family, and support every action (and inaction) with the reasons for your course of action. Keep your compliance department in the loop. Above all, if you have any doubts about a particular transaction — no matter how lucrative the payoff — do not do it.
It is better to address the problems faced by the deteriorating mental faculties of a client sooner rather than later. The window of opportunity opens when a client notices he can no longer track “the little things.” When he's too far gone to be aware of the problem, it's too late for everyone.
Kevin McKinley is a CFP and vice president of investments at a regional brokerage and author of Make Your Kid a Millionaire — 11 Easy Ways Anyone Can Secure a Child's Financial Future. kevinmckinley.com