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American Association of Daily Money Managers

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(photo courtesy of TW Collins and Flickr)

Tracey Longo, the Washington editor of the Financial Advisor magazine wrote a fantastic article entitled, “When Clients Forget”. The article discusses the continued need to protect our seniors and discusses the evolution of a growing trend of individuals becoming known as daily money managers. The association called The Association of Daily Money Managers can be found at www.aadmm.com. The article is important and informative. The AADMM organization is worth familiarizing ourselves with and the article will explain why there is a growing need for these individuals.This is lenghty but well worth the time to read.

  “When Clients Forget“, After a longtime client in her early 80s lost her front-door key for the umpteenth time, started buying pricey jewelry and got bilked out of $10,000 for simple tree work, Washington, D.C.-based investment advisor Alexandra Armstrong unleashed an ally who is fast becoming a critical partner in her work with senior clients. Armstrong, a veteran advisor and the chairman of Armstrong, Fleming & Moore Inc., persuaded her client to hire a daily money manager to help track and manage payments, bills and expenses.
    It was the daily money manager who discovered the client had just bought a $100,000 necklace. “It seems a local jeweler was visiting the client at home to make sales,” Armstrong says. “She only has $1 million to live on, so I was already lying awake nights thinking, ‘My God, she’s going to run through this money.’ Thankfully, the daily money manager caught it.” She called the client’s attorney-trustee to report the purchase of the six-figure gewgaw. The attorney promptly returned the necklace to the well-known D.C. jeweler with a stern warning that no future jewelry, no matter how dazzling, would be paid for.
    I guess my question is simple: Will the rest of the securities industry—advisors and stockbrokers alike—be an Armstrong or will they be a greedy jeweler?
    Because the issue of aging investors isn’t going away. And my fear and the fear of a cadre of regulators and consumer advocates goes beyond the advisor or rep who isn’t proactive with client care. It drives at the darker areas of human behavior, where a senior’s entire nest egg could be repeatedly traded or where somebody can sell unnecessary, pricey products. All because the client could be easily duped.
    Armstrong’s experiences with her senior clients are becoming commonplace, acknowledge a bevy of advisors and aging experts, who report seeing an uptick in the number of vibrant and often savvy investors who change, in some cases almost overnight, into vulnerable individuals with diminished mental capacity. More than 14% of Americans—5.4 million senior men and women—have some form of dementia or Alzheimer’s disease by age 70, according to a 2007 NIH study. That means one in seven seniors is struggling with impairment. The number of seniors who are impaired climbs to 20% when individuals hit age 85 or older. The AARP says that half a million folks 50 years of age or older already need assistance with their finances. With 75 million baby boomers marching into their so-called golden years, the number of at-risk senior investors is a notable and worrisome trend.
    “Supposedly one of the first things to go is your grasp of financial affairs and your ability to deal with simple financial matters,” says Armstrong. “You have to know what to watch for with clients. Even if you don’t think it’s your job or role. Sometimes I don’t think it’s my job either, but some of my clients have been with me for 20 to 30 years. They’re friends.”
    Having known Alex for more than a decade, I’d be hard-pressed to imagine she’d turn a blind eye to clients in need. She discovered the $10,000 tree swindle herself when she was attending her client’s 80th birthday party and got wind of it from a concerned neighbor. She has a close relationship with the folks she works for and it becomes closer, say her staff, as clients age or become widowed or infirm. In fact, she has put a number of proactive practices in place for senior investors to ensure that no one who takes a turn for the worse slips through the cracks at her firm. Repeated questions and odd behavior of any kind are put into the firms customer management system, so that all of the staff members have a big picture of client behavior. When evidence of troubling impairment surfaces, Armstrong or one of her two partners will talk to clients and call spouses, adult children, caregivers and trustees to find out if they’re seeing the same deterioration and taking steps to help.
    Armstrong is also very big on persuading ailing clients to use daily money managers, who will help clients go through the mail, write checks, pay bills, balance checkbooks, make bank deposits and organize tax and financial records. Many managers are trained to look for fraud and financial abuse. Remember, that’s how Armstrong found out about her client’s $100,000 jewelry spree. “I think using a manager like this is a saving grace that helps everyone stay on top of the client’s financial picture,” says Armstrong. To find a daily money manager in your area, look on the American Association of Daily Money Managers Web site (www.aadmm.com).
    Would all advisers and our big, raucous securities industry at large look out for their clients in ways such as these? If someone manages a senior client’s money without a financial plan, or works solely as a stockbroker, selling funds and variable annuities, would these same people go the distance to ensure that family, friends or legal counsel are called when a client exhibits some form of impairment?  Or will they be the opportunistic jeweler, who is happy to make the $100,000 sale?
    I’m hoping that stockbrokers and money managers are more altruistic, like Armstrong, and less in a hurry to close deals. Some of the legal and arbitration complaints at FINRA and the Securities and Exchange Commission suggest that advisers can more often be the latter.
    Regulators also want to see more altruism, and they have started making senior investors’ potential mental impairment a high-profile talking point, calling on the securities industry to pay heed. “One of the most challenging issues facing firms today is seniors with diminishing capacity,” says John Komoroske, FINRA’s vice president of Investor Education, during a recent Web cast. “As people age, they sometimes reach a stage where they begin to have trouble understanding the full scope of financial products and strategies. It can simply be the result of the aging process or disease. This can happen even when dealing with long-term clients who have been active investors.”
    Realizing that a client has become impaired can be almost as frightening for the advisor as it is for senior clients. Armstrong has a male client who recently called the firm three times to ask the same question about his charitable remainder trusts—trusts she’d set up for him several years before. “He kept asking: ‘Now tell me again why I did that,’” she says.
    While FINRA has yet to regulate securities sales to seniors overall, they are watching for problems closely, says FINRA Senior Vice President Elisse Walter. It’s important to base securities recommendations and sales “on current client information, particularly when working with senior clients,” Walter says. “If a senior wants to do a trade that the firm or rep thinks is unsuitable, tell the client that the firm thinks it’s unsuitable.” The client’s true state of mind and any diminished capacity “can only be known if reps concentrate efforts to know their customers and base any recommendations they make on current information.”
    Both Walter and Komoroske suggest that reps ask clients in early meetings if there is a secondary person to contact should questions arise about their health or capacity. Suggesting the client bring a family member or friend to join them at appointments at the firm can also help protect all parties. It’s also important to find out if a client has a durable power of attorney, a trust or a similar vehicle that allows a spouse, children or caregivers to make investment decisions for them.
    It’s delicate work, but critical to helping clients protect themselves, says Ruth Forehand, a vice president at FAC Wealth Management in
Naples, Fla. “One of the things that is critical if a client becomes incapacitated, especially in Florida, is having an explicit power of attorney. That’s part of our due diligence process,” Forehand says. “We want to know from clients: Who are the ones you trust the most? With these documents, we know who to call, where the kids are and how to get in touch with them.”
    To ensure the firm stays in touch with clients who seem vulnerable, Forehand or members of her staff call them monthly or even more often if their condition warrants it. “We especially keep in very close contact with our female clients who have become widowed. We had three in 2007. We make sure we have enough conversations with these folks to know if anything isn’t right,” Forehand says.
    FAC Wealth Management also works annually to ensure that contacts, trustees and beneficiaries are up to date or at least simply still there, for the client to rely on.
    “It’s important to keep them engaged in dialogue when there is no crisis, and they can say what they want, so no one has to make these decisions under the gun saying: ‘Oh my God, I have no idea what Mom or Dad was thinking about this.’”
    Forehand also works closely with seniors who are single women or newly widowed to ensure they fully understand their financial, insurance and care options. The fact that they may have no one to turn to makes their care decisions even that much more critical.
    “It’s our job to be proactive. We don’t run a relationship with clients where we’re just money managers,” Forehand says. “We’re wealth managers and that encompasses risk management and the risk that someone might become mentally incapacitated.”
    That might sound like a tall order for some, but it’s one that has our industry’s name written all over it.  

 

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