Wells Fargo gets aggressive to help advisers protect assets of elderly clients

New unit offers guidance on what to look for as clients' mental capacity starts to diminish

May 12, 2014 @ 12:06 pm

By Mason Braswell

As they lead clients into retirement, advisers are one of the first lines of defense in protecting clients who may show signs of cognitive decline or be susceptible to scam artists. To help combat those threats, Wells Fargo has tapped its former director of regulatory affairs, Ronald Long, to lead a new program called Elder Client Initiatives.

The program focuses on training advisers on what signs they should be watching for and then making tough decisions, such as whether to freeze an account of a client who is making suspicious withdrawals.

In an interview, Mr. Long shared what advisers should be watching for and when they may be liable for a client's questionable spending.

InvestmentNews: What was the genesis of the program?

Mr. Long: We started seeing an increasing number of clients being faced with a potentially abusive situation from third parties, new best friends and many times, family members seeming to want to strong-arm clients out of money.

In 2010, we started counting the number of calls we would get from the field and also training advisers that if they see something they should report it up to a manager. In 2010, those calls averaged around 30 per month. Now, we are well over 100 calls per month.

The firm started to take on a more proactive approach and created this department. I will be the director, and there will be seven folks under me.

InvestmentNews: What are some of the signs advisers should look for?

Mr. Long: A growing problem is diminished capacity or dementia occurring in our clients.

They may be making good day to day decisions, but dementia or diminished capacity really starts to show itself first in the financial area.

For example, the client may start acting out of character. Everyone may be forgetful every now and then, but a client may literally repeat the same requests for funds and then not remember.

You get clients who normally are impeccably dressed start showing up with a ruffled or disheveled appearance, which is not a good sign.

Or, all of a sudden a new best friend is showing up with the client and there's a large age difference. A 78-year old can have 23-year old partner or person of interest, but it is worth at least taking a closer look at that situation.

We have a number of romance scams. They get on fancy websites and will tell us their new boyfriend is in Malaysia or another foreign country, and although he is independently wealthy, he's running into a tough time and needs $50,000 to come to the states and see the love of his life.

You run into the handyman who offered some help around the house and has moved himself in and moved his girlfriend in and is getting [a widow] to write checks monthly.

You get children who can't wait for nature to take its course and want to jump the line on whatever money has been in the will and will start taking money in advance. We had one client's child in distress with her home, wanting to take $192,000 to save the home.

InvestmentNews: What actions can Wells Fargo take?

Mr. Long: A case person [in the Elder Initiatives unit]will look at it to gather additional information to make a go or no-go call on whether this needs to be reported to Adult Protective Services. In most states, that's the agency that will take the initial cut at seeing what's behind what the adviser or client associate may have noticed.

Once it's reported, we still try to work through things like whether to freeze the account pending a resolution or partially freeze it while continuing to pay for home care aid or monthly bills.

Sometimes by highlighting the issue you can get a responsible family member or state-monitored guardian to step in.

With some clients we do ask that they get a doctor's letter that they bring back to the firm. We keep that letter on file and then allow the decision to go through.

InvestmentNews: Can the adviser be held responsible?

Mr. Long: There's no secret that in many of these instances an attorney may sue the advisers, but I'm not sure that the legal standard is there. The adviser is left to a reasonableness standard. Like any of these things, it's going to be facts and circumstances. If the adviser is passing along a check under egregious circumstances, someone might thing that's not good. Then there's our concern internally with the adviser according to Wells Fargo's rules and regulations.

InvestmentNews: Are industry regulators helping?

Mr. Long: This is an area where we need the help of our regulators, especially in areas like privacy laws. If a client seems to be losing it and the daughter is in San Diego, then technically under privacy laws that daughter is not supposed to know that he has a brokerage account. Much less can we say, 'I'm Ron Long from Wells Fargo and I think you need to fly back to check on your dad.'

The other issue that we have a grey area around is: Can we delay or hold up a transaction because we suspect elder abuse? States need to be more explicit than, 'Hey, do the right thing, Wells Fargo, and we'll support you.'

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