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What’s Wrong With Delaying Transactions When A Client Has Diminished Capacity


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The securities industry is pushing  to impose temporary holds on certain transactions that may be precipitated by a clients’ declining mental capacity, or purported loved ones who may be trying to swindle them.  Sounds good in theory. Too bad it won’t solve the problem of financial abuse.  Does the industry think that waiting is going to make the problem of predators go away?

Here is an example of a real case in which this exact method of the broker waiting and hoping didn’t do a thing for the elder who was being abused.  Here’s what happened:

A frail 94 year old man was in the habit of giving his no-count son money for everything from drug rehab to have-a-fun-time.  Theirs was a sort of co-dependency.  Maybe dad felt needed and sonny boy just thought he could always manipulate dad into giving him cash.  But when dad developed dementia, everyone who was responsible for him should have removed the power for financial decisions from him.  He had another son, who was to take over as the appointed successor to dad on dad’s trust. The trust had dad’s big IRA and the rest of his cash in it.

Sonny boy flies out to see dad and drags him to dad’s broker. Dad can’t dress himself, can’t drive and can’t spend money even if he has it in hand.  Dad, prompted by sonny boy, asks the broker for a cashier’s check for $60,000.  The broker delays for a week or so. Dad, promoted by the manipulative son, calls and wants to know where the check is.  Broker then hands over the cashier’s check. Sonny boy of course snatches it. Delay didn’t do a thing to stop the abuse. The broker thinks he should call the other son, who  he knows is appointed to be dad’s successor trustee, but he thinks he can’t because of privacy laws.

Next, sonny boy tells dad to ask the broker to give him a debit card for the cash management account, which contains the rest of dad’s money.  That way, sonny can have a great time withdrawing whatever he wants when no one is looking.  The broker again delays, this time for three months. Sonny boy again prompts dad to bug the broker. Broker then hands over the debit card, but fortunately it is mailed to the other son. In this case, the other son contacted me for advice. I told him to destroy the debit card and get his legal paperwork done so he could officially stop his brother, sonny boy from plundering dad’s account any further.

The Missing Pieces In FINRA’s Attempts To Stop Abuse

As I see it, FINRA is trying to put a band-aid over a gaping wound. It won’t fit and it won’t stop the bleeding. First, the industry needs clear guidance or some way of measuring diminished capacity. They provide none. We at have done that for you. We give you the red flags and score them so you at least have a way to track the signs of diminished capacity in an orderly and uniform way.  Use recognized ways to do this and put a number on it.

Next, no clear way to get past the privacy concerns has yet been established by the industry.  No wonder.  You’re financial professionals. We’ve done that for you, too, at We have the necessary expertise. You need a standardized document, following established legal principles, that lets you contact third parties. The best part of what we’ve created is that the circumstances of when it’s okay to call a third party are defined in writing, proactively and with the client’s consent.

Finally, once you’ve figured out that a client has diminished capacity there is no clear path to follow other than delay. We can see from the above example that delay in some cases, if not all, is not going to stop an abuser. He’ll just wait and then commit the predatory acts later.  Waiting is hoping for some magical thing to happen in the wait time. No one in the regulatory industry tells you what you are supposed to do while you wait.  If you haven’t solved the privacy problem, how are you going to get past that so you can communicate with anyone in a position to protect the elder?  And who is supposed to stop the predator?

Get this: Delay does not fix abuse. It may put it off but that’s it.  Unless you find a way to cut off the head of the evil snake of elder abuse it will continue to strike repeatedly.  If you want to see what to actually do other than wring your hands in frustration, go to and find out some practical ways to prevent predators from swindling your elderly clients. It takes a whole senior-specific policy to do the job. And we’ve got a template all worked out for you. You don’t need to be or feel helpless. You can take action right now to stop predators.

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