Is FINRA's Proposed Rule for Preventing Elder Abuse All Wrong?

Is FINRA's Proposed Rule for Preventing Elder Abuse All Wrong?

Finra, the SEC and NASAA have all been in discussion for years about increasing protection of senior investors. There is a move to create such protection by requiring that financial professionals report suspected abuse to Adult Protective Services and utilize methods to freeze accounts and notify a trusted other when abuse appears to be going on. The proposed rules have a common goal, and different methodologies.

What’s Right With The Proposed Finra Rule


Financial professionals are in a unique position to know their clients. They may have relationships that stretch over years, allowing the advisors and brokers to understand the client as well as seeing changes related to aging, particularly cognitive decline and diminished capacity.  The potential discomfort of reporting is far outweighed by the benefits of reporting.  Reporting to APS does not automatically solve every case of financial abuse of elders. It is at least a start to the process of investigation to find out if an aging person is being victimized. It will not stop a willing victim who is competent from giving away money to a relative who wants to take advantage of them.  It can stop a thief who is preying on an incompetent person. That is what is most important. Furthermore, reporting can be done anonymously.

What’s Wrong With The Rule?


No financial professional should have to report abuse without at least some basic orientation to what to look for and how to understand the red flags of diminished capacity and financial elder abuse. The regulators do not offer that orientation or instruction in these areas. (Here’s one accredited CE course that you can find at our site).

The regulators have underestimated how inadequate the average, non-expert, non-medical person may feel in being required to report elder abuse of a client. Learning what to look for and how to spot abuse is not so difficult, but everyone who may be required to report it should be required to get basic instruction first . They should not just throw a rule at you without teaching you how to work with it.

Further, the proposed rules assume that if one freezes an account or holds all transactions for a couple of weeks or so, that will be enough time to get things straightened out. As a lawyer, I can assure you that is highly unlikely.  Let’s look at an example from an actual case.

“Luke” age 93 lives in a nursing home and is very dependent for daily care.  He has a ne’er-do-well son, “Joey’ who has always gotten money out of his dad, even with a drug habit, spotty work history and numerous misdeeds.  Joey’s sister, Jane, was appointed long ago as Dad’s agent on the power of attorney and she is the successor trustee on Luke’s trust. The broker for Luke knows his client and the family history. He knows that Jane wants to keep her Dad safe.
Joey comes for a visit from out of state to see his father. He takes Luke out of the nursing home for a visit to Dad’s broker and Luke says he wants a cashier’s check for $50,000 out of the cash management account. He also wants a debit card for that account which has a lot of Luke’s assets in it.  Broker is very uncomfortable. He drags his feet.  He feels bound by privacy laws not to call Jane, even though he knows abuse is happening. Finally he sends Luke the check which of course goes immediately to Joey.

The broker finally feels bad enough to call Jane, “on the QT” and tells her what is going on. Jane got advice from me and immediately took steps to have her father removed as trustee from his accounts.  She had to fly to see Luke, living in another state, set up two appointments with two doctors and take Luke to the doctors.  Eventually Luke was evaluated so that doctors could report that he was no longer competent to manage his financial affairs.  Those two doctor reports then went to the estate lawyer. The lawyer completed the transition of Luke out of power to Jane, successor trustee, appointed when Luke was fully competent, long ago.

This process took three months.


Taking the next step when you see financial abuse, as in Luke’s case should not have to be “on the QT”.  Instead, everyone should have a clear path to follow, permission and direction from legal and compliance about escalation, and written, reasonable actions to take. All of this works best within the overall mission of your organization to keep aging clients safer. The proposed rule can certainly work and we support it. But it needs some tweaking.  And it will be successful if brokers get more help before it becomes a mandate.

Dr. Mikol Davis. Ed.D
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Dr. Mikol Davis, Ed.D, is a licensed clinical psychologist specializing in geriatrics and the emotional challenges of aging. He has been a mental health provider for 40 years, ... Click for full bio

What's an Investor to Do When History Doesn't Repeat Itself?

What's an Investor to Do When History Doesn't Repeat Itself?

We’re in an era of extremes. It seems a day doesn’t go by without the word “historical” popping up in the financial news.

The equities market and consumer debt are at historical highs. Interest rates and high-yield credit spreads are at historical lows. We haven’t seen even a 5% pull-back in the market this year—for the first time since 1995—and the DJIA is exhibiting its narrowest trading range in history. These are indeed historical times. And whether this fact has you filled with extreme optimism or extreme pessimism, you have some important decisions to make going forward.

There are theories about how we landed in this particular era of extremes, and most are rooted in the significant changes that have impacted both how we live and how we invest. At the top of the list are globalization, automation, and the largest aging population in history (yet another “historical” to add to the list). It’s said that the most dangerous words in investing are, “it’s different this time,” yet one has to wonder if, in fact, it really is different this time. Not just because of the historical market highs. After all, there always has been and always will be a new market high waiting around the corner. What’s different today is the sheer number and confluence of these extreme highs and lows—and their duration. It’s a situation no investor has experienced before, which can make these waters feel pretty daunting. History repeats itself, and investment strategies are largely built on that conviction. But what do we do when it doesn’t? When history fails to repeat itself, how can investors plan for tomorrow with confidence that they are positioned to protect their assets and gain a reasonable level of yield?

The first step is to recognize that, at least in many ways, the investment landscape really is different this time around. All you have to do is look at the numbers to be sure of that fact. And the catalysts I mentioned before—globalization, automation, and the aging population—aren’t going anywhere. If anything, the impact of each will only grow as time moves on. What that means is that there’s no way to predict what’s coming next. The only thing we know for certain is that predictability is a thing of the past (if it ever really existed at all). The result: you need to approach your portfolio differently than you ever have before.

Your goal, of course, is to find return given a risk tolerance. Current yield is an important part of total return and getting it is an elusive proposition in today’s market. If, like many people, you’re less than confident that the four major sectors that currently drive the equities market—healthcare, discretionary, tech, and financial—are poised to continue to rise at even close to recent rates, it may be wise to seek out alternatives to help drive yield without adding more risk to the equation.

But if alternatives are the wise path forward, which alternatives are the best options?

Real Estate Investment Trusts (REITs), Business Development Companies (BDCs), and energy stocks, traditionally the favored “non-correlated alternatives,” defied expectations when the stock market crashed in 2008, inconveniently revealing high correlations just as the equities market began its freefall. Anyone who was invested in these alternatives at the time knows all too well the devastating impact “non-correlated investments” can have on a portfolio, especially when they fail to do their job when it matters most.

Luckily, there is one alternative that can be counted on to remain uncorrelated to the traditional financial markets and, ultimately, deliver that precious yield: life insurance-based investments. And because this asset is literally built on one of the irreversible catalysts of change, the aging Baby Boomer population, owning life insurance may in fact be the ideal alternative to help investors generate non-correlated returns, regardless of where the market turns next. Even better, these investments typically deliver those returns with very low volatility.

Related: 3 Reasons Alternative Investments May Be Your New Key to Success in Changing Times

What makes life insurance different is that, unlike typical alternative vehicles, secondary life insurance returns aren’t based on the economy. Instead, they are inherently non-correlated because returns are based solely on the longevity of the individual insureds.

As much as we would all love for the bull market to continue on its merry way, one thing history does tell us even today is that a bear market will come. It’s only a matter of when. As you strive to hedge your portfolios and prepare for the inevitable, life insurance-based investments are one tool that can help you achieve the three things you need most: diversification, low volatility, and yield.

Bill Acheson
Investing in Life
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Bill Acheson is the Chief Financial Officer of GWG Holdings, Inc. Mr. Acheson has over 25 years of sophisticated financial services expertise. Mr. Acheson has extensive experi ... Click for full bio