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Aug 25 2017

Guest Contributor: The Financial Professional’s Guide to Advising Senior Investors

By: Leila Shaver, Founder of My RIA Lawyer

Baby boomers are retiring in droves. Many of them are facing health issues, the loss of a spouse or the realization that they haven’t saved enough for retirement. In fact, some have already dipped into their retirement savings to pay for unexpected expenses and to care for aging parents. Baby boomers have seen pensions disappear and employment benefits shrink. Many who had money in the stock market took their money out after the collapse in 2008. They have been afraid to put money back in the stock market and so have missed out on the market’s rebound and are making nothing off the money sitting in their savings accounts. There are still others who have saved for retirement, have little to no debt and are looking to enjoy their retirement years.

Such diversity in the circumstances of senior investors may prove challenging, but once financial services professionals understand the individual needs of each of their senior clients, these challenges can turn into opportunities to adequately provide for their senior client’s retirement.

Sources of Income

Baby boomers rely on multiple sources of income—- Social Security benefits, pensions, retirement savings (including IRAs and 401(k)s), and earnings from full- and part-time work. Since the 1960s, Social Security benefits have consistently comprised one-third of the income of those ages 65 and older. For lower-income households, Social Security accounts for 76 percent of incomes, while compromising only 21 percent of income for higher-income households. Older racial and ethnic minorities are acutely dependent on income from Social Security, as they are less likely to have income from pensions, earnings or assets.

How Baby Boomers Feel

According to the Employee Financial Wellness Survey published by PwC, which surveyed baby boomers, members of generation X and millennials, not having enough emergency savings for unexpected expenses, the inability to retire and difficulty meeting monthly expenses were the top financial concerns. Not having enough emergency savings for unexpected expenses was a top financial concern cited by women more often than men. Baby boomers were more likely than any other age group to say that lower healthcare costs, lower inflation and a rising stock market would help them achieve their future financial goals. Less than half of the baby boomers surveyed stated that they would be able to meet their basic expenses if they were out of work for an extended period of time. Twenty-five percent of baby boomers stated that their health had been impacted by their financial worries.

What Does This All Mean?

These statistics and facts point to the scary realization that a majority of baby boomers have either no retirement savings or not enough. They are also combating a higher incidence of physical and cognitive impairments as well as unexpected expenses from the dissolution of a marriage, care for an aging parent or surmounting health care costs. Of the 59 percent of baby boomers who plan to retire in the next five years, only 42 percent know how much income they will need in retirement and 42 percent are not confident they will be able to cover medical expenses in retirement.

These issues may be more significant for a client based on their gender, ethnicity or cultural expectations. Financial services professionals must be able to understand how gender, ethnicity and culture affect the behavior of the senior client and provide custom solutions that will enable them to adequately provide for their retirement.

Know your Customer

FINRA Rule 2090 requires firms to know the essential facts concerning each client, which will allow a firm to effectively service the client’s account, act in accordance with any special instructions, understand the authority of each person acting on behalf of the client and comply with all applicable laws and rules.

Senior investors face many unique challenges. Start with developing a list of services that are relevant to older clients who are preparing to or are retired. Below is a non-exhaustive list of areas for discussion:

1. Help your senior clients set short- and long-term goals.

2. Create a budget. Make sure your senior clients include all expected expenses and contemplate any possible situations that your client will need to be financially prepared for.

3. Many senior investors depend on investment income for their living expenses, so consider less speculative products.

4. You may need to discuss lifestyle changes with your client based on their monthly expenses and expected income.

5. When senior investors retire, they face new tax rules arising from their receipt of Social Security, pension and 401(k) or IRA income. Be prepared to discuss these new rules and how they will need to manage their money in response.

6. Senior investors may also need to consider life insurance and long-term care insurance. Be prepared to discuss when your senior client may need to buy it and what the cost would be.

7. As senior investors prepare for their golden years, they should also start figuring out what, if anything, they wish to leave as an inheritance. Good estate planning will bring comfort to those who wish to leave assets behind for their loved ones.

8. Be prepared to discuss specialized matters, such as health care planning and real estate transactions. Have in place a team of professionals that may be called in to discuss these more specialized issues.

9. When senior investors face emotionally charged situations, financial professionals may find themselves questioning their client’s capacity to make sound financial decisions. If such questions of capacity arise, you must be prepared to refer your client to other professionals who will be to address the client’s needs and provide guidance.

When senior clients come into your office, make sure that that it is welcoming and accessible.

1. Walkways should be cleared of any clutter and doors opened. This is especially important for your senior investors who may be in a wheelchair or require the assistance of a walker.

2. Use a tablet or have versions of documents that utilize large font for those senior investors who may have problems with sight.

3. Speak clearly and slowly to ensure your senior clients understand you. If necessary, repeat what you have already said using the same words to minimize confusion.

4. Ask your senior investor to bring a trusted friend or family member with them. You can use this trusted person to help your senior investor understand your recommendations.

5. Provide documents that your senior investor may take home with them and review further.

6. Make sure to provide extra time for your appointment with a senior investor.

7. Be prepared to discuss your qualifications and fees in a way that is easy to understand. Be sure to describe any conflicts of interest and provide this information in writing for them to review.

8. For clients going through an emotionally charged time, observe a “decision-free” period, during which the client may take uninterrupted time to review the information you have provided.

The Exploitation of Senior Investors

Financial services professionals may find it useful to use a trusted family member or friend to help communicate with a senior investor so they may better understand the financial recommendations being rendered. However, an adviser should look out for any possible red flags that their client is being exploited by the trusted family member or friend. According to the MetLife Study of Elder Financial Abuse, 34% of elder financial abuse cases were perpetuated by a family member, friend or neighbor.

Below is a list of some indicators of elder financial exploitation or abuse:

1. The appearance of a new friend or caregiver

2. Sudden changes in the senior client’s banking practices

3. Large credit card transactions or an unusual increase in credit card debt

4. Abrupt changes in a will or other financial documents

5. A sudden transfer without a reasonable explanation of the senior client’s assets to a friend, family member, provider or acquaintance

6. Indications that the senior client is being isolated and controlled

Financial services professionals serving senior investors may find such indications of elder financial exploitation or abuse to be troubling, but they do have the power to help their senior clients. The Securities and Exchange Commission recently approved the adoption of new FINRA Rule 2165 (Financial Exploitation of Specified Adults), which permits members to place temporary holds on disbursements of funds or securities from the accounts of specified customers where there is a reasonable belief of the financial exploitation of these customers.

The SEC also approved amendments to FINRA Rule 4512 to require members to make reasonable efforts to obtain the name of and contact information for a trusted contact person for a customer’s account. Financial services professionals have the support of FINRA and the SEC to protect the accounts of their clients when there is a possibility of elder financial abuse.


Helping senior investors plan for their retirement and ensure that they will have the ability to provide for the rest of their lifetime can be gratifying. With a large segment of the American population retiring or on the brink of retirement, the need is greater than ever for financial professionals are ready to provide specialized services to senior investors. Elder financial abuse and exploitation remains a concern and FINRA and the SEC have empowered financial services professionals to identify red flags and protect the assets of their senior clients.

The opinions in the preceding commentary are those of the author alone and do not necessarily reflect the views of The DI Wire. The article was previously published in AI Quarterly, the quarterly magazine for members of the Alternative Direct Investment Securities Association.

Article by: The DI Wire

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