Financial Planning

Valuable lessons for vulnerable clients

04 December 2019

Money & Life team

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.

The financial abuse of vulnerable Australians is increasing, but planners are well positioned to protect their clients from this type of abuse.

With 20 per cent of Australians currently suffering some form of disability, this figure is set to increase as the population continues to age. For example, of people aged 60 to 70, 8 per cent suffer from mild cognitive decline, but this figure substantially increases as we age, with 37 per cent of people aged 70 to 90 having mild cognitive impairment.

“The statistics are concerning and show that we need to start adapting our advice as life and cognition changes,” says William Johns CFP® – Founder of Health and Finance Integrated

It is a view supported by Anne McGowan, CEO of Protecting Seniors Wealth, who says the financial abuse of the elderly, disabled and vulnerable members of the community is sadly on the increase.

Speaking at the 2019 FPA Professionals Congress, McGowan said protecting clients from financial abuse and fraud is increasingly becoming important for financial planners.

“Planners are uniquely positioned to protect their clients from this type of abuse, as part of their Best Interest Duty obligations. There needs to be a focus on the prevention of financial abuse of vulnerable clients, so I urge planners to step up and avoid being complicit in this abuse.”

McGowan painted a very dark picture, saying financial exploitation and fraud was extensive in Australia.

“It impacts millions of Australians, with 60 per cent of abuse being financial. And with seniors holding 70 per cent of wealth in this country, they are often targeted for this type of abuse. The ramifications for clients impacted by this are far-reaching,” McGowan said. “So, it’s important for planners to develop closer relationships with their clients and not shy away from having important conversations with them.”

As seniors continue to age, they become increasingly frail and are less able to deal with perpetrator tactics. With increasing cognitive impairment and even dementia, they are vulnerable. Unfortunately, financial abuse can lead to other types of abuse, such as psychological, emotional and physical abuse.

“So, the profession needs to step-up,” McGowan said. “Often, with seniors, their adult children are the most common perpetrators of abuse. These vulnerable people may not understand what is happening and may need help. I believe planners have a responsibility to assist.”

A basic human right

According to Johns, financial abuse doesn’t stop at the elderly, extending also to the disabled and vulnerable members of the community. He said the U.N. Convention on the Rights of Persons with Disabilities protects the ability and human rights of every disabled adult person to make their own decisions.

“But as a planner, it is our responsibility to understand the level of impairment and capacity of our vulnerable clients to make those decisions,” Johns said.

He added that dignity driven financial planning for the vulnerable included:

  • Respecting a client’s right to autonomy;
  • Supporting the decision-maker as their planner;
  • The need to respect and work with advocates; and
  • Protecting the client’s right of privacy.

With a special needs son, Kathy Havers CFP® – an Executive Financial Adviser at Viridian Advisory – is acutely aware of his vulnerability, should something happen to her. According to Kathy, parents have multiple concerns with special needs children, with their biggest concern being their own mortality.

“These parents and families of special needs children often feel isolated. They don’t know who to turn to for help when setting up their finances to protect their child.”

Kathy believes planners can play a critical role as the trusted professional for clients with vulnerable children.

“As planners, we can assist these clients by making things as simple as possible for them, by creating the right financial structures and trusts, which provides both asset protection and control of the assets,” Kathy said.

“Remember, for vulnerable people, finances are typically held in a trust structure. As a planner, you need to respect the privacy of those who can’t speak for themselves. But you do need to obtain key documents, like deeds, Power of Attorney and wills. Make sure you read these documents thoroughly, understand any implications on those who are vulnerable, and retain them on file.

“And as for binding death benefit nominations, that’s still a grey area for the Power of Attorney and administrators, and is something to be mindful of for your client.”