An Aging Crisis 4/19/12

Willie Sutton was a notorious bank robber. When asked why he robbed banks, he supposedly deadpanned the reply, "Because, that is where the money is." In fact, he never said that famous phrase at all. A creative reporter made it up. Willie’s real motivation? He wrote in his autobiography, Where the Money Was, “ Because I enjoyed it. I loved it. I was more alive when I was inside a bank, robbing it, than at any other time in my life.”

Nevertheless, in the financial planning world the same phrase could describe the senior market. Today's seniors control more wealth than at any time in the history of the world. Those in or approaching retirement are attractive prospects for both ethical and unethical practitioners. While there are many competent and trustworthy professionals interested in serving older clients, the magnetism of all that money also draws those looking for an easy buck.

Inevitable Consequences

The longer lifespans of today's seniors compound the problem. Demographers tell us that the 85+ age group is the fastest growing segment of our population. Since the largest portion of health care costs for seniors occurs in the final year of life, many seniors see their assets grow while much of their discretionary spending shrinks. This occurs at the same time that their cognitive abilities related to financial matters declines. This decline starts before retirement age (as early as age 50) and continues to worsen as we age. Progress is not uniform but it is an inevitable consequence of our aging brains. While we commonly accept that strength, speed and stamina diminish as we age, we are much less willing to recognize that our abilities to make sound financial decisions also diminishes. We joke about our inability to recall a name or grow frustrated when we can't seem to remember a word. We dismiss it as just a "senior moment" when it is actually an indications that the neural pathways in our brains are starting to weaken. Scientists believe that mathematical and quantitative abilities decline sooner than language and other functions.

Weakness Encourages Action

This diminished capacity to process financial decision-making combined with increased wealth has drawn the attention of two disparate groups: criminals who prey on the weak and regulators charged with protecting the vulnerable.  Financial planners are caught  between these two sides and pay the price in greater regulatory scrutiny, increased skepticism and diminished trust. Well intentioned regulations and consumer alerts pose additional barriers for ethical advisers trying to help seniors.  Confidentiality requirements and privacy policies may impede advisers from being able to alert appropriate parties when an aging client starts to make less than wise decisions.

Prudent professionals serving seniors accept that regulatory oversight is likely to grow - as will cases of financial fraud against the elderly since regulations may not deter those with unethical or criminal intent but instead punish them after the fact. Financial planners need to increase their knowledge of best practices when serving senior clients and put in place systems and processes that protect and preserve both client confidentiality and the client relationship while protecting the financial planner's business from increased liability

Good Ethics is Good Business

The Chinese word for crisis consists of two words  one symbol represents danger while the other represents opportunity. There is an aging crisis affecting all of us who work with older clients.  Conducting a financial planning practice at the highest ethical standards is the key to navigating the trouble waters that surround the senior marketplace. A strong ethical framework provides for principle-based decision making. This becomes even more important as rule-making becomes more prevalent and targeted. High standards of ethical behavior at all times allow financial planners and their clients to benefit from the opportunity while avoiding the danger. 

While there are many competent and trustworthy professionals interested in serving older clients, the magnetism of all that money also draws those looking for an easy buck.

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