We aren’t getting any younger, and neither are our clients!

We aren’t getting any younger, and neither are our clients!

The last thing you want to be accused of is elder abuse.  But that can easily happen as your clients pass age 65.  There are two reasons to take stock of which of your clients meet that criteria, particularly when the beneficiaries are likely to get involved:

– They may move assets to another advisor.
– They may second-guess the past and current investment strategies.

Industry estimates are that 25% of assets under management are those of baby-boomer investors now reaching the age of 75.  Not only are assets likely to be moved, but investors are more likely to begin showing signs of dementia or other decreased mental acuity.  It is a fact they are prone to poor decision-making and are vulnerable to exploitation.  Schwab, Fidelity, and Vanguard have implemented algorithms to spot these trends.

Many investors have pushed their advisors for a couple of decades for higher returns, particularly in light of low-interest rates, which means more risky investments.  Unfortunately, what you and your client agreed upon years ago may not be considered today as “suitable”.  The signed disclosure documents of the past are often not enough to fend off an E&O claim alleging elder abuse, lack of suitability, and breach of fiduciary duty.

The solution is three-fold:

  1. Look for changes in your clients’ mental capacity.  Be aware of this natural progression.
  2. Encourage your clients to engage family members early in their financial affairs. Beneficiaries can be helpful if involved early and, alternatively, can be very disruptive if they learn late in the game their inheritance is not what they expected. 
  3. It is important to document that all parties understand that you, as the advisor, have your client’s best interest in mind, that the investment choices or strategies have been agreed upon, and the reasons they are suitable for the client.

Implementing these strategies will increase the likelihood the assets will remain under your management and lessen the risk of an E&O claim.  In addition, you just might pick up these family members as new clients!