Seniors in declining health can easily become vulnerable to financial predators. And, sadly, it is often those they trust the most, such as family members, who take advantage of them.

Brian Trainor, a retired police sergeant in Saskatoon who spent five years researching the issue when preparing his book, Stop Fraud, warns that the problem is significant and often unidentified: “It frequently involves someone the elderly person knows and trusts, such as a close friend, a child or a [person granted a power of attorney].”

Elderly people are especially vulnerable to predators because they tend to trust authority figures, says Clay Gillespie, vice president of Rogers Group Financial Ltd.in Vancouver. The problem is often compounded by the onset of dementia and other conditions that cause cognitive impairment.

“We have an important fiduciary responsibility to protect our older clients because they’ll often listen to us when they won’t listen to their children,” Gillespie says. “The key is to put protections in place before they become incapacitated. Dementia happens gradually, and you can’t always see it coming. And once a person is considered incapable of managing their affairs, the courts have to get involved.”

The first step in protecting your client is to set up a POA that stipulates who has the authority to represent them in financial matters, says Geoff White, a lawyer who specializes in estate law in Kelowna, B.C. “It should be someone they trust implicitly,” he says, “because the POA can act without oversight.”

White suggests adding a requirement that all receipts and vouchers be retained. You can also stipulate that the person with POA provide a client’s family members with an annual accounting of income receipts and disbursements, along with a yearend net-worth statement.

However, there is no legal obligation to comply with these requests. If they are not honoured, one option is ask for an investigation by the provincial public guardian’s office, which has the power to freeze your client’s accounts pending the probe.

To create an additional layer of protection, some people give a POA to two individuals, who must approve everything jointly. However, that involves extra administration, says White, and can slow things down if there is a disagreement.

An alter-ego trust, with a trust company acting as trustee, is even stronger than a POA. An alter-ego trust is one in which the client puts assets in the trust, with him- or herself as the sole beneficiary. Only non-registered investments can be placed in one, however.

“An alter-ego trust gives the client complete access to his money during his lifetime, and the estate can be settled without probate,” says Terry McBride, a tax and estate plan-ner with Raymond James Ltd. in Saskatoon. “The downside is the trust company fee of 2% or more.”

As well, you should monitor your elderly clients’ activities and intervene if you become suspicious.

Mike Watkins, a financial advi-sor with Edward Jones in Duncan, B.C., recommends that you maintain regular contact with your elderly clients who are still managing their own financial affairs: “If necessary, have them bring in their lawyer, accountant, a family member or the person with POA to participate in your discussions.”

Don’t be afraid to refuse your client’s instructions if those instructions are contradictory or would harm their own interests, he adds, even if it costs you their business.

After a POA takes effect, it’s important to remember that your client remains your first responsibility, says Trainor. The incidence of misconduct under a POA is very high, and it’s a criminal offence. Signs of possible abuse include the person with the POA treating your client disdainfully.

“Watch for significant changes in your client’s financial picture,” Trainor adds. “If they unexpectedly say they’re low on funds, that might indicate a problem.”

If you suspect wrongdoing, Trainor recommends that you speak privately with your client: “Meet with him or her, preferably at home, where they’re comfortable, and look for signs of undue influence, intimidation and bullying. Ask simple questions, such as whether they trust the person and how that person uses their money. Listen carefully and repeat their answers to make sure it’s clear.”

If your concerns persist, discuss the situation with your firm’s compliance department. The next step is to report the problem to the public guardian. If all else fails, says Trainor, go to the police. Financial advisors are covered by the Personal Information Protection and Electronic Documents Act, which allows a person or agency to disclose to the police a situation in which they think someone is being taken advantage of financially.

@page_break@“While you do not have a reporting obligation to advise the police,” Trainor cautions, “you have a fiduciary responsibility to protect your client.” IE