Diminished Capacity: How An Investment Adviser Can Protect Their Elderly Clients

All too often, we hear how another elderly investor was taken advantage of by some type of fraudster. Even more frequently, we receive queries from registered investment advisers (“RIAs”) asking what they can do about an elderly client they feel is being financially abused by a caregiver or who is suffering from diminished capacity challenges.

Unfortunately, this difficult and sensitive issue is likely to become more common as the ranks of older seniors grow; a recent study published by the National Institute on Aging1 reveals that impaired cognition affects approximately 20 percent of people aged 85 years or older. Investment advisers often lack the tools to help their senior clients and risk liabilities, such as breaches of privacy. But there are proactive steps an adviser can take at the onset of a senior client relationship and throughout its course than can benefit a senior client and mitigate liabilities to the advisers.

Throughout this article we provide information on the red flags of diminished capacity, warning signs of elder financial abuse, and guidance on steps registered investment advisers can take to protect senior clients and the RIA’s business.

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