If Alzheimer’s disease isn’t on your radar yet, it should be. As the baby boomer generation ages, the number of people with Alzheimer’s will climb: an estimated 16 million are expected to suffer from the disease by 2050, up from 5.4 million today, according to the Alzheimer’s Association.
One early sign of the disease is trouble managing money, which puts financial advisors on the front lines. What’s more, according to Fidelity Investments, Alzheimer’s can double the amount of money a couple will need in retirement. Advisors can offer a critical service by helping clients plan for both dementia and devastating costs.
“Getting together your financial team is just as important as getting together your medical team,” said Angela Geiger, chief strategy officer for the Alzheimer’s Association.
The problem is big enough that the Investor Education Foundation of Financial Industry Regulatory Authority (FINRA) partnered with the Alzheimer’s Association to identify best practices that can be shared industry-wide. Members of the FINRA Foundation and the Alzheimer’s Association met with industry participants in March 2010.
Advisors’ best strategy is to be proactive by talking to clients early about the potential for dementia, but many are loathe to do so, according to John Gannon, senior vice president in FINRA’s Office of Investor Education.
“One thing we’re looking at is talking to firms and professionals about how to start that conversation,” Gannon said. “As you can imagine, telling somebody they may develop a form of dementia is not the most comfortable discussion to have.”
In a 2009 Fidelity Investments survey of more than 350 advisors, 96 percent said they feel unprepared to help clients who have Alzheimer’s. Half said that even when they suspect a problem exists, they are unsure how to raise the subject.
As a result, a major goal of the Roundtable will be identifying steps advisors can take in response to red flags such as memory loss and confusion; donations to shady charities; clients who conceal their condition to the point of making unsound decisions; and suspected financial abuse by relatives or caregivers.
Gannon also noted that advisors may have trouble distinguishing between Alzheimer’s and the more innocuous effects of aging – say, the client who seems confused, but is just a little hard of hearing.
Garth Scrivner, a senior investment counselor with StanCorp Investment Advisers in Albuquerque, N.M., said age-related dementia is a potentially “huge problem” for the industry. “Our average client’s age is probably between 60 and 80, so I definitely have seen some clients who are starting to exhibit the early signs of dementia and the beginning stages of what I guess might progress to Alzheimer’s,” he said.
Making a plan well beforehand is key, Scrivner said. “We try to talk to people early and say, ‘I know this isn’t happening now, but should it happen, let’s discuss what we’re going to do, just because you never know.’”
Seeing the Signs
At minimum, clients need powers of attorney and other documents to transfer financial and healthcare decision-making if they lose mental capacity. But in many Alzheimer’s cases, the solution isn’t that simple.
Deborah Hoskins is an elder law attorney in Colorado Springs and owner of Pikes Peak Financial Planning. She advises a couple in which the husband has managed their money for decades, but is going downhill fast with dementia. To make matters worse, he denies the problem—not uncommon with Alzheimer’s—and insists on keeping control of the books. His wife is mentally sound, but knows nothing about the bills.
“She’s conflicted—does she or does she not force the issue?” Hoskins said. “And you don’t want him to lose face in front of his wife. You don’t want to just blatantly say, ‘That’s a stupid investment. Let’s not do that.’ You have to respect feelings and it gets really complicated.” Managing these dynamics takes patience, she added.
“We’re certainly behind the curtain when it comes to the actual workings of that part of their marriage. The words ‘trusted advisor’ is sort of a cliché, but that’s exactly what you are at this point,” she said.
With another couple she advises, one spouse is in a nursing home and the other is on the way. As dementia has emerged, Hoskins increasingly relies on her long-term knowledge of the couple’s desires for their estate. “Now if one of them says otherwise, I’m not exactly sure I would act upon it or configure their financial life differently, because it’s the dementia talking, not their true intentions,” she said.
Another challenging feature of Alzheimer’s is a tendency to hide things. That became an issue for a client of Eleanor Peterkin, director of client relations and development for Altfest Personal Wealth Management in New York City. Her client had just become a widow and believed she had little money to live on. “She came in and said, ‘I opened the drawer of a bureau in the attic and I found these certificates. Are these worth anything?’ It turned out she was a very wealthy woman and she had no idea,” Peterkin said.
She believes many advisors are reluctant to discuss personal issues with clients, aging included. “It’s much easier just to sell someone a bond than to really sit down and listen to them.” Advisors also may see clients trying to conceal memory deficits, especially in Alzheimer’s early stages. Brian Fricke, owner of Financial Management Concepts in Orlando, has seen this first-hand—not at work, but with his mother and father-in-law.
“Oftentimes when you ask them a question, they’ll answer it with a question. Or they’ll crack a joke. Some way, somehow, they become adept at camouflaging and hiding,” Fricke said. “I know with my mom, she certainly knows something’s not quite right. She of course doesn’t want to admit that she’s got dementia or Alzheimer’s. There’s kind of a denial phase.”
Other times, Fricke said, signs are fairly obvious that something is amiss.
“We’ve seen clients who seem to want to change their will or their beneficiaries every other day. That can be a red flag,” he said. “Then sometimes we’ve seen it where a day later, a week later, they don’t even remember.”
For clients who know their memory is failing, planning can be reassuring. “It really calms them down and helps them feel much more secure about and in control of what’s ahead of them,” Peterkin said.
Advisors who work with older clients also find themselves guarding against telemarketers and fraudsters who target vulnerable people. One of Peterkin’s clients said yes to a suspicious charity not once, but several times. “At the end of the year, instead of giving $200, he’d given $1,200,” she said.
For many advisors, the first step when they start having concerns is reaching out to a family member. But what if the family member is the problem? Ted Feight, owner of Creative Financial Design in Lansing, Mich., has worked with many older clients. But he especially remembers the woman in her late 60s whose dementia led to a stack of unpaid bills, the electricity turned off and a two-year tax arrearage that put her house in jeopardy.
After these matters were taken care of, the woman’s daughter came up from Florida, ostensibly to look after her mother. It wasn’t long, Feight said, before he discovered that his client’s account was $45,000 lighter. He took the matter to court, obtaining a guardianship and making it impossible for the daughter to steal her mother’s money.
Relatives and caregivers often are the perpetrators in elder financial abuse, Gannon said, but advisors can be hard-pressed to tell what, if anything, is going on. Suppose your client shows up with a family member and wants to make a large withdrawal. Is undue pressure being put on the client? How do advisors report that, and to whom?
“Those are challenging questions for a firm,” Gannon said.
According to Hoskins, people who can access a client’s money often find a way to rationalize helping themselves, especially if they expect to inherit the money eventually: “It’s really tempting to skim a little here, skim a little there, knowing full well your person doesn’t notice.”
Protect Yourself
Along with protecting clients, many advisors take pains to protect themselves, specifically by documenting that they have offered age-related products like long-term care insurance.
William Hammond, founder of The Elder and Disability Law Firm in Overland Park, Kan., said he believes that’s a smart move.
“There haven’t, to my knowledge, been any cases that held an advisor liable for not doing it. However, I would tell you I think every advisor who’s dealing with clients in that age group ought to at least have explained [long-term care insurance] to the clients and ought to have had them sign off to say, ‘Yes, we had that discussion.’”
Advisors also should be knowledgeable about the potential costs of Alzheimer’s, Hammond said, noting that in Kansas, care ranges from $4,000 to $7,000 per month.
“Most people can’t afford that,” he said.
Fricke discusses such concerns with every client: “‘Hypothetically speaking, here’s how a long-term care, Alzheimer’s kind of event could impact your financial situation.’ Then based on that, we tell them whether we think they should consider purchasing long-term care insurance.”
Similarly, he is diligent about speaking up if he questions a client’s well-being.
“I never want to have to answer a question from a client or their family like, ‘Did you ever notice any memory issue or behavioral issues? If you did, how come you kept that information to yourself?’”
Taking a low-key, non-judgmental approach, Fricke said he’s never been accused of overstepping his bounds.
“Sometimes the kids’ reaction is ‘Thank you very much. We’ve been noticing the same thing and we were wondering if other people were, too.’ So we’re confirming what they’ve already been thinking,” Fricke said. “Sometimes it is kind of the first shot across the bow for the kids or the other family members. They hadn’t noticed anything, but now they’re aware there might be something going on. Typically, they’re appreciative of that.”
While some advisors shy away from the complications of elderly clients, Hoskins finds the work challenging and satisfying.
“You’re really helping them in a time of slow-motion crisis, and the need will be greater and greater,” she said.
What To Do:
- Consult the Alzheimer’s Association’s resources at www.alz.org and on the 24-hour hotline staffed by trained specialists (1-800-272-3900).
- Consider having your firm join the Alzheimer’s Association’s Early Detection Alliance.
- Consult your firm’s legal or compliance office.
- Initiate conversation with clients early about planning for the financial implications of a disease like Alzheimer’s.
- Ensure clients have POAs or other legal documents for financial and healthcare decision-making.
- Consider augmenting POAs with reporting or “open records” requirements, for example, ensuring multiple siblings share accountability for the client’s finances.
- If appropriate, discuss long-term care insurance with clients and document conversations.
- To assist with memory issues, document meeting agendas and provide notes for clients to take home.
- If concerned about undue pressure on your client from an outside source, try to speak with the client alone to evaluate the situation. If needed, slow down the process and consult legal or compliance officers to determine if reporting to law enforcement is warranted.
- Educate yourself about elder care resources such as geriatric care managers and continuum of care facilities.
Watch For Scams:
The SEC brought 70 enforcement actions against scams targeting the elderly between 2006 and 2009 (the most recent period for which figures are available). According to the Federal Bureau of Investigation, senior citizens are especially attractive marks because they tend to have a nest egg, access to credit and the more polite, trusting stance of an older generation. Fraudsters also bank on the likelihood that older people will make poor witnesses.
SEC investigators say fraudsters often use spam e-mails to push bogus investments or “free lunch” seminars, where seniors will be subjected to high-pressure sales tactics on questionable investments. Older investors also may be lured into “pump and dump” schemes, in which fraudsters make false or misleading statements about a company to boost the stock price, then make a profit by selling their own holdings.
The FBI’s web site lists numerous scams targeting the elderly, including:
- A medical equipment manufacturer offers free equipment in exchange for an individual’s Medicare number, which is then used to bill Medicare for goods or services that weren’t needed or weren’t provided.
- Unscrupulous providers bill health insurance companies for services that were not rendered.
- Counterfeit prescription drugs are sold by online providers offering “special deals.”
- Telemarketers solicit senior citizens with high-pressure schemes that require targets to provide credit card or bank account information to collect a “prize.”
- Investment fraudsters solicit older people with schemes involving pyramids, advance fees, prime bank notes or Nigerian letter fraud.
