Protecting seniors from themselves

FINRA, Wall Street’s industry-funded watchdog, is planning to offer guidance to brokers about delaying transactions made by investors whom they believe may be suffering from dementia or are being unduly influenced by caregivers.

That makes sense as about 10 million Americans today are 80 and older — many of whom may have some cognitive impairment.

Collectively, this is a group that already holds trillions of dollars in wealth.

Without close scrutiny, these seniors could stand to lose their money forever if certain safeguards are not put in place. Right now, if someone asks for a trade to occur, firms are under an obligation to move ahead.

What is particularly troubling is that in many cases these people manage their own finances. This makes them vulnerable, which is why it’s so important for family members and financial advisers to be able to detect emerging issues early so they can step in to offer protection.

Typical signs that indicate it is time for a family member to intervene may include a decreased understanding of common financial and/or health care concepts, problems identifying risks in a financial opportunity, taking longer to complete everyday tasks, reduced attention to details in financial documents, problems calculating a return on an investment, and, most basic of all, figuring a tip in a restaurant.

These are signs of confusion that may not be evident to a physician (or even necessarily indicative of dementia).

An adviser can question a client’s competence by doing the following: l Giving a child or trusted friend or relative online access to accounts or copies of financial statements. l Drafting a power of attorney document. l Encouraging the senior to reduce “financial clutter,” which may include consolidating multiple banks, brokerage houses and IRA accounts. l Drafting a “letter of diminishing capacity” with an attorney, which allows the financial adviser to contact a trusted person if cognitive impairment is suspected.

It’s never easy impinging on someone’s independence, whether it involves taking away the keys to the car or access to managing their investments. Yet, as difficult as it may be, this needs to be done as early as possible to protect them.