Protecting the wellbeing of older Australians
20 July 2020
20 July 2020
Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.
Money stress and inheritance impatience are catalysts for elder financial abuse. Clifford Fram explores how financial planners can be alert to the signs and help protect their clients.
“Elder abuse is any act occurring within a relationship where there is an implication of trust, which results in harm to an older person.”
– Australian Network for the Prevention of Elder Abuse
Financial abuse is the misuse or theft of an older person’s money or assets. It can include using money without permission, misusing an enduring power of attorney or transferring or selling property against the owner’s wishes.
Source: Council of Attorneys-General: National Plan to Respond to the Abuse of Older Australians (Elder Abuse) 2019–2023
Source: AFCA
Sources: Aged Care Steps, Seniors Rights Service, Financial Services Council
The enduring power of attorney can be a problematic area for financial planners, says Aged Care Steps director Louise Biti.
“The FASEA Code of Ethics for financial planners provides a good road map to follow. It helps you to focus on your best-interest duty to your client and not the person holding the EPoA.
“It is about questioning every single transaction and decision and being mindful about whether it is in the client’s best interest. If it is not, it may trigger you to question whether you have the client’s implicit permission to follow a specific course of action.”
Louise believes financial planners should explain to people with a power of attorney that they have a fiduciary responsibility to the older person.
“Some financial planners are afraid to do that because they may lose the client. But if they don’t do the right thing they could be in breach of the code of ethics, and they may be perpetuating elder abuse if they don’t always act in the best interests of the client.”
Louise shares a tip from UK social worker Jo Fox, who says financial planners can ask family members to bring in a large photograph of the older person to meetings and place it on the table if that person cannot be present.
“It helps remind everyone that the first duty is to the client and might reduce the risk of conflicts of interest.
An unemployed son abuses his elderly father in an altercation over his pension money. A daughter brings her non-English speaking mother to Australia on a parental visa but withdraws her life savings from her bank account.
These are two extreme examples of elder financial abuse.
The fact is that mistreatment is typically more subtle. But it’s common and, as in the examples above, it usually occurs in families.
Although Australian statistics are still being compiled, two to twelve per cent of older people in similar countries are abused, and the most common form of abuse is likely to be financial.
It may be associated with inheritance impatience, and it’s usually an adult child taking advantage of their parents’ assets, which contradicts the perception that elder abuse is most likely to happen in aged care facilities.
“Warning signs for financial planners are when older people say their child is suggesting they put money in their business or that they want them to sell their house and move in with them,” says Russell Westacott, CEO of Seniors Rights Service and co-chair of Elder Abuse Action Australia.
The catalyst could be a well-meaning plan in which a parent sells their home to move into a granny flat at their child’s home. It starts as a win-win. The parent uses their capital to help pay the child’s mortgage, and the child’s family provides care and companionship.
But these plans often go awry.
Russell fears the financial turmoil caused by the COVID-19 pandemic will be a catalyst for increased abuse. “Lots of adult children have stresses on their businesses, or they may have lost their job and be struggling to pay their bills. Some may put pressure on mum or dad around access to the capital in their family house or their savings and investments.”
He urges financial planners to think about the motivation of the adult child.
“It might be a good one, but then let’s put in writing what is meant to occur and what has occurred. If the plan does not work out, then at least the older person can show how much money they put into the arrangement and claim some or all of it back,” Russell says.
There’s no denying that financial abuse is a complex problem to navigate, say the authors of the Council of Attorneys General’s national response plan on elder abuse.
There is no single type of older person who is at risk, and no single type of person who may cause harm.
“It has been estimated that as many as 185,000 older people in Australia experience some form of abuse or neglect each year. Anecdotal evidence suggests that financial abuse is the most prevalent form, but it frequently co-occurs with one or more of the other recognised forms of abuse of older people,” write the authors.
Financial planners are in a good position to spot signs of elder abuse, says the Financial Services Council.
In fact, they are obliged to be vigilant. But it can be a challenge to distinguish potential financial abuse from what is actually an informed decision free from improper influence.
“You want to know and understand your client,” says Louise Biti, a Director at Aged Care Steps who has been training financial planners for more than 23 years.
“Clients can make their own decisions, even if they are bad decisions. But the financial planner needs to be able to question if there is undue influence or if it is something the client has thought about and genuinely wants to do.
Louise says triggers for suspicion include an adult child who suddenly starts to attend meetings. It’s a big red flag if that child stands to gain from some of the decisions the client is making.
“It doesn’t mean it’s inappropriate, but it does mean it needs to be explored. If possible, the financial planner can follow up with the client when they are alone to ask if they are comfortable with the decision.”
Another useful tactic is to call a family meeting with all the children present to discuss the decision in the context of the clients’ entire retirement journey, including provisions for aged care.
When considering complaints about elder abuse, the Australian Financial Complaints Authority (AFCA) asks financial providers the following three questions:
“Generally, a sense of entitlement by the abuser seems to be common. The abuser often does not recognise that the money is not theirs,” says AFCA.
Elder financial abuse does not necessarily involve cash or transactions, notes Russell.
“A common scenario is an adult child being out of work and moving back to their bedroom as a temporary solution.”
But years later, they are still there against their parents’ wishes and it can be difficult, emotionally and legally, to get rid of them.
Another subtle form of financial abuse involves a family member or a friendly neighbour offering to go to the shops for the older person but skimming off money each time, Russell says.
The groceries come back, but without change or a receipt. It could be a weekly or fortnightly event, and it adds up.
“We have people calling us to say for the last 12 months they have been giving this person $200 a week, but they only get $100 of groceries back.”
Clients can mitigate this risk by formalising shopping arrangements and other support with a service provider.
“This is an area in which financial planners can make a positive impact. A little like estate planning, every financial plan should include a solution for aged care planning,” says Louise.
“It doesn’t mean every financial planner needs to be an expert, but every financial planner needs to have an awareness of what support mechanisms are out there and how to instigate a discussion with the client. For example, how home care works, the process for accessing it and how it helps protect the elder retiree client from abuse.”
“There are both self-funded and government-subsidised solutions for people who still have a reasonable degree of independence, but need help with activities of daily living such as shopping, cooking or getting out of bed, showering or cleaning the house.
The first step towards funded care is through the My Aged Care online service centre.”
Louise notes there may be long waiting periods. “So plan ahead instead of waiting until the crisis point. If the need is urgent, options for self-funding until the subsidy arrives can add to quality of life. It’s all about planning expenditure patterns in retirement. Contingency planning and risk management.”
There are lessons for financial planners from the COVID-19 experience, Louise says. One parallel is a taste of what it might be like to be frail and unable to get out and do the things people usually do. Another is that it is best not to be pressured into rushed decisions.
“If you translate that to an older person, most people don’t plan for frailty. Then a crisis happens and people make very rushed and ill-informed decisions that might create a solution, but not necessarily the best solution. It can come at a very high cost around isolation or less desirable living arrangements.”
Louise breaks retirement down into three phases:
“Those will be different lengths for different people. However, the Australian Institute of Health and Welfare statistics show we should expect the frailty period to be 15 to 25 per cent of our retirement.
“Australia has a great aged care system. But if people want choice and they want to personalise their lifestyle, they are going to need their own resources. For most people, that requires financial planning. Cash flow is the key to funding these services.”
She suggests that discussions about frailty are an essential part of retirement planning.
“With clients aged 40 and older, you can present that picture of retirement and explain the need for a plan that provides enough capital, enough cash flow and enough flexibility to provide for the phases.”
Louise says children sometimes have a mindset that their older parents no longer need their money, but they do. Having a retirement plan that acknowledges a period of frailty may reduce the risk of an older client giving their money to an adult child without considering the consequences.
Often, the last line of defence is the financial planner — the voice of reason at the table, Louise says.
Protecting the wellbeing of older Australians20 July 2020 Money stress and inheritance impatience are catalysts for elder financial abuse. Clifford Fram explores how financial planners can be alert to the signs and help protect their clients. What is elder abuse?“Elder abuse is any act occurring within a relationship where there is an implication of trust, which results in harm to an older person.” – Australian Network for the Prevention of Elder Abuse Financial abuse is the misuse or theft of an older person’s money or assets. It can include using money without permission, misusing an enduring power of attorney or transferring or selling property against the owner’s wishes. Source: Council of Attorneys-General: National Plan to Respond to the Abuse of Older Australians (Elder Abuse) 2019–2023 Ten red flags
Source: AFCA Ten ways to protect an elderly client
Sources: Aged Care Steps, Seniors Rights Service, Financial Services Council A seat at the table – enduring power of attorneyThe enduring power of attorney can be a problematic area for financial planners, says Aged Care Steps director Louise Biti. “The FASEA Code of Ethics for financial planners provides a good road map to follow. It helps you to focus on your best-interest duty to your client and not the person holding the EPoA. “It is about questioning every single transaction and decision and being mindful about whether it is in the client’s best interest. If it is not, it may trigger you to question whether you have the client’s implicit permission to follow a specific course of action.” Louise believes financial planners should explain to people with a power of attorney that they have a fiduciary responsibility to the older person. “Some financial planners are afraid to do that because they may lose the client. But if they don’t do the right thing they could be in breach of the code of ethics, and they may be perpetuating elder abuse if they don’t always act in the best interests of the client.” Top tipLouise shares a tip from UK social worker Jo Fox, who says financial planners can ask family members to bring in a large photograph of the older person to meetings and place it on the table if that person cannot be present. “It helps remind everyone that the first duty is to the client and might reduce the risk of conflicts of interest. An unemployed son abuses his elderly father in an altercation over his pension money. A daughter brings her non-English speaking mother to Australia on a parental visa but withdraws her life savings from her bank account. These are two extreme examples of elder financial abuse. The fact is that mistreatment is typically more subtle. But it’s common and, as in the examples above, it usually occurs in families. Although Australian statistics are still being compiled, two to twelve per cent of older people in similar countries are abused, and the most common form of abuse is likely to be financial. It may be associated with inheritance impatience, and it’s usually an adult child taking advantage of their parents’ assets, which contradicts the perception that elder abuse is most likely to happen in aged care facilities. “Warning signs for financial planners are when older people say their child is suggesting they put money in their business or that they want them to sell their house and move in with them,” says Russell Westacott, CEO of Seniors Rights Service and co-chair of Elder Abuse Action Australia. The catalyst could be a well-meaning plan in which a parent sells their home to move into a granny flat at their child’s home. It starts as a win-win. The parent uses their capital to help pay the child’s mortgage, and the child’s family provides care and companionship. But these plans often go awry. Financial stressRussell fears the financial turmoil caused by the COVID-19 pandemic will be a catalyst for increased abuse. “Lots of adult children have stresses on their businesses, or they may have lost their job and be struggling to pay their bills. Some may put pressure on mum or dad around access to the capital in their family house or their savings and investments.” He urges financial planners to think about the motivation of the adult child. “It might be a good one, but then let’s put in writing what is meant to occur and what has occurred. If the plan does not work out, then at least the older person can show how much money they put into the arrangement and claim some or all of it back,” Russell says. There’s no denying that financial abuse is a complex problem to navigate, say the authors of the Council of Attorneys General’s national response plan on elder abuse. There is no single type of older person who is at risk, and no single type of person who may cause harm. “It has been estimated that as many as 185,000 older people in Australia experience some form of abuse or neglect each year. Anecdotal evidence suggests that financial abuse is the most prevalent form, but it frequently co-occurs with one or more of the other recognised forms of abuse of older people,” write the authors. Difficult to distinguishFinancial planners are in a good position to spot signs of elder abuse, says the Financial Services Council. In fact, they are obliged to be vigilant. But it can be a challenge to distinguish potential financial abuse from what is actually an informed decision free from improper influence. “You want to know and understand your client,” says Louise Biti, a Director at Aged Care Steps who has been training financial planners for more than 23 years. “Clients can make their own decisions, even if they are bad decisions. But the financial planner needs to be able to question if there is undue influence or if it is something the client has thought about and genuinely wants to do. Louise says triggers for suspicion include an adult child who suddenly starts to attend meetings. It’s a big red flag if that child stands to gain from some of the decisions the client is making. “It doesn’t mean it’s inappropriate, but it does mean it needs to be explored. If possible, the financial planner can follow up with the client when they are alone to ask if they are comfortable with the decision.” Another useful tactic is to call a family meeting with all the children present to discuss the decision in the context of the clients’ entire retirement journey, including provisions for aged care. Three questionsWhen considering complaints about elder abuse, the Australian Financial Complaints Authority (AFCA) asks financial providers the following three questions:
“Generally, a sense of entitlement by the abuser seems to be common. The abuser often does not recognise that the money is not theirs,” says AFCA. Elder financial abuse does not necessarily involve cash or transactions, notes Russell. “A common scenario is an adult child being out of work and moving back to their bedroom as a temporary solution.” But years later, they are still there against their parents’ wishes and it can be difficult, emotionally and legally, to get rid of them. Another subtle form of financial abuse involves a family member or a friendly neighbour offering to go to the shops for the older person but skimming off money each time, Russell says. The groceries come back, but without change or a receipt. It could be a weekly or fortnightly event, and it adds up. “We have people calling us to say for the last 12 months they have been giving this person $200 a week, but they only get $100 of groceries back.” Clients can mitigate this risk by formalising shopping arrangements and other support with a service provider. Home care plan“This is an area in which financial planners can make a positive impact. A little like estate planning, every financial plan should include a solution for aged care planning,” says Louise. “It doesn’t mean every financial planner needs to be an expert, but every financial planner needs to have an awareness of what support mechanisms are out there and how to instigate a discussion with the client. For example, how home care works, the process for accessing it and how it helps protect the elder retiree client from abuse.” “There are both self-funded and government-subsidised solutions for people who still have a reasonable degree of independence, but need help with activities of daily living such as shopping, cooking or getting out of bed, showering or cleaning the house. The first step towards funded care is through the My Aged Care online service centre.” Louise notes there may be long waiting periods. “So plan ahead instead of waiting until the crisis point. If the need is urgent, options for self-funding until the subsidy arrives can add to quality of life. It’s all about planning expenditure patterns in retirement. Contingency planning and risk management.” Frailty planThere are lessons for financial planners from the COVID-19 experience, Louise says. One parallel is a taste of what it might be like to be frail and unable to get out and do the things people usually do. Another is that it is best not to be pressured into rushed decisions. “If you translate that to an older person, most people don’t plan for frailty. Then a crisis happens and people make very rushed and ill-informed decisions that might create a solution, but not necessarily the best solution. It can come at a very high cost around isolation or less desirable living arrangements.” Louise breaks retirement down into three phases:
“Those will be different lengths for different people. However, the Australian Institute of Health and Welfare statistics show we should expect the frailty period to be 15 to 25 per cent of our retirement. “Australia has a great aged care system. But if people want choice and they want to personalise their lifestyle, they are going to need their own resources. For most people, that requires financial planning. Cash flow is the key to funding these services.” She suggests that discussions about frailty are an essential part of retirement planning. “With clients aged 40 and older, you can present that picture of retirement and explain the need for a plan that provides enough capital, enough cash flow and enough flexibility to provide for the phases.” Louise says children sometimes have a mindset that their older parents no longer need their money, but they do. Having a retirement plan that acknowledges a period of frailty may reduce the risk of an older client giving their money to an adult child without considering the consequences. Often, the last line of defence is the financial planner — the voice of reason at the table, Louise says. |
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