Protecting clients who may suffer from diminished mental capacity or who could be targets of financial exploitation has been a recent focus of our Regulators and Insurers.  Recognizing that it is more likely than ever that advisors will encounter vulnerable clients, many of the regulators have issued suggested practices for advisors working with older or other vulnerable clients.

Advisors can guard their vulnerable clients from financial exploitation and avoid the risk of regulatory action through initiatives directed at protecting clients and identifying a Trusted Contact Person that the advisor has been authorized to consult if they suspect their client has become vulnerable, diminished mental capacity or financial exploitation.  For your convenience, we include a sample Trusted Contact Person consent form which could be used for this purpose.

Some cautionary measures advisors can take:

• Expand your view of which clients may be vulnerable and consider situations which are:  age-related, physical or mental factors, major life events, language or literacy restrictions, etc.
• As part of your regular meetings with clients, watch for changes in client behaviors or understanding of the issues discussed.
• Document discussions and provide clients with written summaries or follow up information.
• Communicate in plain language and validate understanding by asking open ended questions.
• For older clients in particular, more frequent and in-person meetings will help to stay aware of changes in behavior.
• Consider different strategies for investing (ie. move to lower-risk, income-producing options)
• Ask the client to identify a trusted contact person or persons you can contact if you have.
• Reassure clients that you understand their changing situation and explain the benefit to them of identifying a trusted contact person.
• Build a relationship with the trusted contact person and ask they attend client meetings.

While it is suggested that the trusted contact person would ideally not have an interest in the client’s account, it’s nevertheless likely that many clients will identify a family member for that role.  It is a good idea to get to know family members to gain a better understanding of a client’s wishes and needs. 

Vulnerable clients need special care and due diligence.  As an advisor, you will be at risk of regulatory action if you have not taken reasonable steps to protect your clients’ interests.  This is a positive initiative that deserves the attention of advisors, both to protect your clients and to protect yourself.

Sound business practices add value and builds client trust.

Remember, 
Good Business is Compliant and Compliance Matters!