The aging baby boom population necessarily means that the numbers of investors who suffer from diminished mental capacity or dementia, such as Alzheimer’s disease, are increasing. Cognitively impaired individuals are at higher risk for financial exploitation. Most investment professionals realize that diminished capacity presents problems that need to be dealt with.
The AARP Public Policy Institute recently surveyed more than 500 brokers, financial planners and compliance officers on the risks faced by senior investors and published some alarming facts. Among them are:
Most (but not all) firms have some procedures to address diminished capacity. The most frequently cited were discovering whether such clients have a financial power of attorney.
Investment advisors and compliance officers have disagreements regarding holding a customer’s order pending resolution of concerns about that customer’s mental capacity. Most advisors said they hold all such transactions, but only one-third of compliance officers believed that to be necessary. Another third of advisors reported holding only transactions they believed were detrimental to the customer.
Financial professional believe that firms should require training on dealing with diminished capacity, but AARP found that firms do not require it.
The AARP report states that financial professionals must be trained and ready to take appropriate steps when there is evidence that a senior client is unable to make appropriate financial decisions.
Jason Zweig recommends that those with aging parents inquire into what procedures the firm handling their parents’ account has in place to protect them, and secure financial powers-of-attorney. In addition, it is wise for older investors or their families to have the investor’s account reviewed periodically by an independent expert to check for significant losses, unwanted risks or other abuses in the account.
Page Perry is an Atlanta-based law firm with over 150 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. For further information, please contact us.