Welcome to Financial Advisor IQ

Clients’ Aging Parents Present Opportunities for Growth

By Chris Latham February 14, 2014

More U.S. adults are looking after elderly loved ones in mental decline. According to the Alzheimer’s Association, over 15 million caregivers provided 17.5 billion unpaid hours of help to people with Alzheimer’s disease in 2012, and the number of people suffering from the illness is projected to reach 7 million by 2025. Advisors who work with baby boomers have a golden opportunity to prove their value when these clients step into the caregiver role. And in many cases, the advisors wind up managing the impaired relative’s assets.

Healthy clients are often stressed by overseeing both the medical and financial affairs of relatives with some form of mental impairment, says Thomas West of Signature Estate & Investment Advisors, a Tysons Corner, Va., firm that manages $3.7 billion. Meanwhile, the impaired loved ones may struggle to accept their diminishing independence. A good advisor is sensitive to the strain both parties are under, says West, who specializes in families facing disability challenges. “How you differentiate yourself about caring comes across during periods of change in a client’s life, when there’s uncertainty and fear,” he says.

Responding to the needs of a relatively small client led to an influx of assets for Jeff Karelis, a partner with KSP Financial Consultants in Waltham, Mass. Nearly 15 years ago, the client had asked Karelis to meet with her parents’ estate attorney, who was also their accountant. The client’s father had recently died, and her mother was in poor health. Both had Alzheimer’s.

Karelis, whose firm manages $415 million, looked over the parents’ investments — which were spread across three other advisory firms — before discussing inheritance, tax and capital gains issues with the attorney-accountant. The mother soon died, and $3 million in assets was split evenly between Karelis’ client and her sister. Shortly after inheriting the money, the sister became Karelis’ client as well.

Tom West
After reflecting on their parents’ battles with Alzheimer’s, both women purchased long-term care insurance from him. Last summer the sister passed away, and $1.5 million was split between her two children. Karelis’ son, Andrew, manages those accounts.

“In this firm, we have a sensitivity to the illness,” Karelis says. His mother had Alzheimer’s, his wife volunteers with patients, and for the last two years KSP Financial has participated in the Greater Boston Walk to End Alzheimer’s.

Derailing Gold-Diggers

Some clients bring in assets if they don’t feel completely confident in their impaired parents’ financial advisor, says David Diesslin, whose firm manages $723 million out of Fort Worth, Texas. A longtime client who had power of attorney over his father’s assets moved them to Diesslin & Associates several years ago. It wasn’t that the other advisor was doing a bad job, Diesslin says. But his client, who was responsible for reviewing his father’s investments and bill payments, clearly preferred the advice relationship with Diesslin's firm.

Advisors are occasionally enlisted to prevent an elderly relative from being financially exploited. In 2012, one of Thom Fross’s clients asked him for help with an 89-year-old aunt who had inexplicably changed her will, naming as beneficiary a friend who had been working outside the country for years and recently reappeared. Fross & Fross Wealth Management oversees $400 million in The Villages, Fla.

Fross met with the aunt, brought in an estate attorney, and helped get the friend off the will within a week. His client, who has power of attorney, was so grateful she transferred her aunt’s $2 million account from another advisor to Fross.

Advisors with experience in such relationships warn that client meetings can be a challenge. Randy Carver of Carver Financial Services, a firm in Mentor, Ohio, with $850 million under management, says impaired relatives at such meetings can become agitated when they see their children taking charge, even if they have given them power of attorney.

He says advisors must be respectful of the parents even as they take orders from the children. “It requires explaining to the parent why that’s necessary,” Carver says. To avoid tension, it may be best to meet with the healthy client alone whenever possible.