The Worst Misconception About Advisors and Elder Financial Abuse
Imagine this: your aging client is 86 years old, slightly grumpy, and he thinks he knows better than just about everyone else on nearly everything. He’s quite willing to follow your advice, though and that’s what makes a good relationship with him.
Lately, he’s got you worried. He is obsessed with the internet. He spends many hours a day on it and he tells you about this man he met online who has an amazing investment he wants to get into. When he starts telling you about it, it sounds like a scam of the worst kind. You warn him not to do it and he says you don’t understand.
He asks you to liquidate one of his investments you manage. You do it. He tells you how happy he is that he’s got this great thing going now. A month later he calls you and wants to liquidate a lot of his funds to raise some significant cash for his “friend” who has the scammer-sounding “investment”. You say, “don’t do this!” He won’t follow your advice. This is new, and puzzling. What should you do?
Rules tell you that you must follow your client’s instruction and that you are not supposed to reveal his financial information to anyone. Should you call Adult Protective Services? Can you? You are not sure what to do.
Here’s the answer: you are permitted to report financial elder abuse. According to the regulators’ Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Persons, which discusses the issue in detail, you are also permitted to disclose this information to protect against or prevent actual or potential fraud.
But what if your client think his internet “friend” is fine even if you are seeing telltale signs of fraud in your client’s interactions with the scammer? You can report the apparent crime in an online form to the FBI as long as you know enough detail from your client. I think anyone who suspects internet fraud should do this, even if it turns out to be some legitimate thing in the end. It probably isn’t. And your client’s money could all be gone if you do nothing. Would that be okay with you?
Financial professionals need to be clear about your role in preventing and stopping elder abuse. Law enforcement can’t always stop the criminals but sometimes they do. No one can stop what is never reported to them. Do not be misled by the misconception that protecting your client’s private information is supposed to stop you from reporting apparent fraud and abuse.
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Don’t Be Tempted to Persuade Your Clients
Recently, I've been seeing a lot of articles about Advisors persuading clients to move from active management to passive management. Persuading clients to follow the way you manage investments is a big mistake. Do this instead.
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