Dealing with vulnerable clients suffering from financial abuse

This article was current at the time of publication.

Australia’s ageing population presents a range of challenges in areas such as healthcare, aged services and accommodation. Another pressing concern is the increasing prospect of retirees running out of savings which, in the financial sector, is known as longevity risk.

A less acknowledged risk, but one that has significant implications for accounting practitioners, is the difficult issue of recognising and dealing with often complex financial situations that can be interpreted in some – but not all – circumstances as either deliberately deceptive or serious abuse of trust.

The elderly are frequent victims since they are often with diminished physical or mental capacities. However, financial abuse can occur equally with other vulnerable persons such as those with a disability or those unwittingly falling foul of financial misappropriation by family members.

In some cases, the fact that financial abuse has occurred or is occurring is easy to pinpoint. It usually involves the acquisition of assets by adult offspring who have been given financial authority, according to research by Senior Rights Victoria, and it commonly manifests through the sale of a family’s property.

"As a practitioner, we need to be aware of how clients might become vulnerable." Anna Tantau FCPA

In less clear-cut situations, it can stem from an arrangement between an adult family member and a parent or grandparent that has been fully agreed, but which is financially detrimental to one or both parties.

Awareness and recognition of financial abuse

“As a practitioner, we need to be aware of how clients might become vulnerable,” says Anna Tantau FCPA, Senior Manager at business advisory and accounting firm SEIVA.

“One of the things we need to do is make ourselves aware of the prevalence of vulnerability,” Tantau says.

“The other to keep in mind is that often victims don’t report financial abuse. As a practitioner, it’s very important that we know how to recognise it.

“It might be a change in physical appearance or demeanour, the way they carry themselves, or the way they speak. You might see signs that someone else has taken over their affairs. There might be a change in the way they’re doing transactions. You might notice that someone else is doing all the transactions for them.”

Preventing elder financial abuse

Tantau says that while sensing something has changed and “is not quite right” warrants further investigation, the best approach for practitioners is prevention.

“Our role as advisers is often to prevent these things happening,” she says. “We can’t prevent someone from the relationships they form, but we can make them aware of how to keep their finances safe.

“Advise clients that they need to be aware of their assets. This is particularly important if, traditionally, that client hasn’t been the one to take care of their finances.

“The other thing is making sure the client knows to make their wishes known to family and to their legal advisers, and anyone [else] dealing with their legal or professional affairs, including their accountant.”

Tantau adds that clients should ensure their will is up to date, have a power of attorney, and ensure all arrangements are formalised legally. Accounting practitioners should also play a key role in providing financial advice around investments.

“From a practice point of view, make sure you have a policy and procedure that your staff can follow to alert you and report where they feel a client may be suffering financial abuse,” she says.

There can also be ethical considerations to contend with, such as when a potential financial abuse situation is identified but there is a conflict of interest because the perpetrator is also a client of the firm. In this situation, the accountant must be guided by the Code of Ethics for Professional Accountants, APES 110.

Tantau says in such scenarios, it’s important to convey that the abused party seeks external advice.

“You would say to them something like, ‘In order for us to be able to carry this out for you, I'm obligated under my professional conduct rules to ensure that you’re independently advised’.

“You’re displaying that you care about the client. You’re displaying that you have to work under a professional code of conduct that protects them, the client.”

Toolkit to help practitioners understand and deal with potential financial abuse

ATM Consultants partner Stephen Jones FCPA was one of the members of a special committee set up to create the Financial Abuse of Older People toolkit, which has now been made available to practitioners. Jones agrees that identifying financial abuse can at times be difficult.

“That’s where the toolkit comes in,” Jones says. “It covers awareness, recognition, prevention and remediation, as well as elder abuse services in each state.

“I’ve heard some interesting stories around financial abuse. For example, you get the charities who call you up to make a donation. If you give, they tend to call again. If you have dementia, they ring every week.”

Another case he cites is when a grandmother was made a director of a company so her assets could be used to help finance her grandson’s business. Jones says all parties agreed to the arrangement, even though it was fraught with risk.

“I guess people have a right to make a bad decision, and the person who can gain from the situation doesn’t always know there’s a problem,” Jones says.

Disappointingly, it seems that sometimes they are.

Three points to remember about elder financial abuse

1. Practitioners need to be attuned to financial abuse, particularly with elderly clients.
2. Accountants should closely monitor unusual client behaviours and transactions that might signal potential problems and have procedures in place to raise red flags.
3. Financial abuse can occur even though the relevant parties agreed to an arrangement. In cases where there may be conflicts of interest, recommend independent advice.