Expert answer 1: Mark Rantall
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Former CEO of the Financial Planning Association
The adviser needs to feel clear about the facts that are making them feel uneasy. It is important to understand the following precisely:
- The significance of the withdrawals
- Who made them
- Under what authority they were made.
My advice would be to firstly ring Michelle and confirm whether she has a power of attorney. Inquire as to whether she has in fact made the withdrawals from the investment and savings accounts under that power of attorney.
Secondly, I would write to Elise and advise her of my understanding of the circumstances. It is important to do this in writing to ensure an audit trail that demonstrates an appropriate duty of care. In the letter to Elise, I would request confirmation that Elise has actually authorised the withdrawals, and that she understands the impact these have on her current financial plan. I would suggest that a review of her financial plan may be worthwhile. I’d also clarify whether or not she had issued a power of attorney to any party, and request a copy of it.
Thirdly, I would write to the respective organisations that manage her investments and accounts. I’d point out the recent significant withdrawals and request that they verify the authorisation of the withdrawals.
Finally, I’d request a meeting either with Elise directly or through Michelle, as a matter of urgency. I’d go to her home if she is not well enough to travel.
If the above steps left me with any suspicion that Elise’s accounts were accessed inappropriately, I’d escalate the matter to the local authorities for investigation.
Expert answer 2: Anne Graham
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Managing Director and Senior Financial Planner at Story Wealth Management
I have observed cases where family members have been ‘influencing’ a client. If possible, I’d certainly be speaking to the client’s solicitor to clarify the existence of any formal arrangements. It is a tricky situation to navigate, and I’ve found that having a conversation with both parties is a useful starting point. If we can make sure that the client and their family members are clear on the role and responsibilities (under law) of the person holding the power of attorney, this can stop any inappropriate behaviour before it even starts. Family members can talk themselves into poor behaviour with the justification that they are ‘going to get the money anyway’. Sometimes, having an open discussion can help them check their thinking and set people back on the right track.
It’s also important to realise that Elise may not know of or be concerned about the behaviour. The adviser needs to be aware of her actual capacity (how mentally and physically capable she is of assessing the situation), which can be challenging. Sometimes, signs of diminished capacity are difficult to recognise in older clients in the presence of family members. Perhaps the adviser may drop into the home of the older client, just to check and validate any observations as a duty of care.
If the adviser is unable to get comfort, then perhaps the judgement call is to contact the authorities who can handle such matters via the Victorian Civil and Administrative Tribunal. There is growing awareness in the industry about protecting and maintaining the rights of our older clients - something that will become increasingly important as the population ages.
Expert answer 3: Adrian Raferty
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Associate Professor of Deakin University
Financial Planning and Superannuation
Dealing with older clients is not an easy process, particularly when their health is declining. First and foremost, we must be sympathetic to Elise and by extension to her loved ones, including her daughter Michelle. With any long-standing relationship with a client, it would not be unreasonable to travel to visit her at her home (or hospital bed), rather than ask an unwell client to come into the office for an ‘out-of-cycle’ appointment (as it is assumed that regular meetings and reviews have been held with the client in the past). This concession to travel to the client would be considered favourably, helping to solidify the client/adviser relationship (and helping to build a new relationship with Michelle).
It is important not to jump to any sinister conclusions with respect to withdrawn amounts. They may have been legitimately used to, for example, pay for medical bills, or perhaps they have been transferred into other secure investments in Elise’s name. When the opportunity arises to meet with Elise and/or Michelle, it is important to avoid making any accusations when enquiring about the nature of the withdrawals. Losing a client’s trust can sometimes be the result of them perceiving that you have lost trust in them. Instead, subtly mention that you noticed that there have been some withdrawals that you were unaware of - and as a matter of good practice and due diligence, you wanted to ensure that you were on top of them, as they may have an impact on future goals, including estate planning and intergenerational wealth transfer, or on income tax consequences. Depending on the response, it may be an opportunity to offer to educate Michelle about how to manage the investments, including explaining the risk/return trade-off and other considerations, such as cash flow management and income tax.
Assuming the worst - that Michelle is taking Elise’s money for her own personal purposes - you will need to check (although you should already know) if Michelle has Elise’s enduring power of attorney, and seek legal advice from her solicitor (again, you should know who this is) as to whether that attorney was issued when Elise was of sound mind. That is, she had the capacity or the mental state required to be able to make a valid attorney in the first instance.
Alternatively, if there is merely a general power of attorney, the question needs to be asked whether Elise is currently incapacitated and therefore the attorney is no longer valid. If the power of attorney is valid, generally you will be limitless with Michelle’s actions, although it would be recommended to put in writing your concerns of withdrawals that she is making and highlight any potential consequences or ramifications. Resigning as Elise’s adviser would need to be considered at this stage. If Elise had any other potential beneficiaries (for example, a spouse, other children or grandchildren), I would encourage you to contact them about your concerns with Michelle’s mismanagement of Elise’s finances, as they may be impacted financially in the future.
This scenario highlights the importance of regular communication and financial reviews with the client, and particularly with their children as they get older. As the intergenerational transfer of wealth approaches, it is important to engage with the next generation and educate them on the best practices of financial management. It is imperative that you know your client with respect to details such as valid wills and powers of attorney, and that you have relationships with other professional providers, such as lawyers and accountants. Finally, it is important to be sympathetic and considerate to your client and their loved ones at difficult times. An excellent bedside manner will not go unnoticed.