When clients begin working with The Greenard Group, we will ask them to provide a comprehensive list of information. This is much like when you go to a new doctor’s office – they will ask new patients to provide information about their past health, and answer a series of questions, etc. We feel that the more information our clients provide to us, the more we can proactively assist them today, and as they age. By putting the necessary measures in place for your loved ones today, you can help protect them from financial fraud in the future.
Providing your family tree
For example, we will ask new clients to provide details of their family tree. One may initially think – why would we need that? We use this information for a variety of different reasons. If our client’s parents are alive, then we can obtain details of general health, well being, and financial care. In some situations, the parents are already deceased, and we can obtain details of their life expectancy. This genetic type information is useful when preparing financial plans, reflecting on the process of ageing, and planning for the most likely outcome.
In some cases, we may have clients whose parents are dependent on them. In these cases, the plans are updated accordingly. In other cases, our client’s parents have accumulated significant assets and estate values. Whether this is from selling real estate, or previously accumulated, then we discuss with our clients the different ways that they can assist and protect their parents.
Professional checklist
Another document that we ask clients to complete is called a professional checklist. Within this document we ask our clients if they have a will, power of attorney, and a representation agreement. Depending on the discussions with the family tree, we will expand the request to ensure that their parents also have these documents in place. Often we have our younger clients ask us about these documents as they are not familiar with them. When dealing with our aging clients, we talk about the importance of putting these documents in place while they have capacity.
Refresher on financial power of attorney
When clients open an investment account with us, they have the option to list their spouse, or another individual, as financial power of attorney on the account. Financial power of attorney has two levels. The first level is limited to buying and selling decisions. The second level of financial power of attorney has the ability to instruct us on buying and selling decisions, and the ability to request withdrawals from the account. The withdrawals from the account requested from the financial power of attorney can only go to the client’s bank account linked to the account.
Years ago when I was an investment executive (today referred to as a Wealth Advisor) it was useful to have couples with power of attorney on their accounts. Wealth Advisors must verbally confirm each trade. As a Wealth Advisor, if I called the home number I could speak with either the client directly or the power of attorney, if the client was not at home. As a Portfolio Manager, I can do trades on behalf of our clients without obtaining verbal consent. The purpose of having the financial power of attorney for trading is not as important for Portfolio Managers.
Many of the couples that we work with have their spouse set up as financial power of attorney. This is done so that either can call us up with instructions. It is also done so that they have the ability to see all accounts when they log into Scotiaonline. If a client does not have power of attorney set up on their spouse’s registered accounts, then they would not see these accounts when they log in. The option then is for each of them to log in with different card numbers or set up power of attorney on their respective accounts – the power of attorney option is much easier.
For our aging clients who wish to have their adult children involved, we will encourage them to set up financial power of attorney. With financial power of attorney, it is set up on an account by account basis. If a client has five accounts, then there would be five financial power of attorney forms. The financial power of attorney enables the children to also obtain copies of monthly statements, either paperless or paper, and online access. A financial power of attorney relates only to the financial accounts where the client has signed the applicable forms. The financial power of attorney cannot request money for themselves directly from the investment account. Provided that they have the second level of financial power of attorney, which includes the right to withdraw funds, then the only direction we can take from the financial power of attorney is to move money to the client’s bank account.
Banking power of attorney
Another type of power of attorney document is called “banking power of attorney”. As we are on the wealth side of the bank (i.e. investments), Portfolio Managers cannot set up banking power of attorney. Clients would have to meet with an advisor at the bank to set this up. Similar to financial power of attorney, the banking power of attorney would be set up on an account by account basis. For example, a client may want to set up their adult child as power of attorney on both their savings account and chequing account.
When we are speaking with clients about power of attorney documents, we always mention that one of the weakest links from a risk standpoint is often “banking power of attorney”. The client, or the financial power of attorney, may request funds to be transferred to the bank. Once the funds are in the bank then either the client or the banking power of attorney may withdraw funds from the account. The risk comment relates to whether the banking power of attorney is acting in the best interests of our client. Elder abuse isn’t always from fraudsters and unknown individuals – in some situations it is from people who are close to you. I’ve seen situations where an adult child may feel a sense of entitlement or that their parent could never spend the net worth they have and ultimately would be the beneficiary. Before setting up banking power of attorney, ensure you can fully trust the related or non-related individual.
Legal power of attorney
As a refresher, within legal power of attorney, there are two types - a general power of attorney and an enduring power of attorney. With both of these types of legal power of attorney documents, you must have capacity to make the decision and to sign the documents. Both types of legal power of attorney documents cease to be valid once you pass away or become bankrupt.
A general power of attorney ends if you become incapacitated or become mentally incompetent. An enduring power of attorney continues even if you become incapacitated or mentally incompetent. Years ago, many of the lawyers that we worked with would recommend an enduring power of attorney over the general power of attorney, for our aging clients. We have noted some confusion with clients with enduring powers of attorney and health and personal care directives.
Health and personal care
When I am speaking with my aging clients about health and personal care as they age, many feel that an enduring power of attorney is all they need. An enduring power of attorney cannot make medical, health, or personal care decisions for you. These types of decisions are not covered in the provincial (BC) Power of Attorney Act. Decisions relating to medical, health, and personal care fall under the provincial (BC) Representation Agreement Act. For more information on this topic you can visit: www.gov.bc.ca/advancecare. We encourage clients who are wanting to effectively plan to have both an enduring power of attorney for financial affairs and a representation agreement for medical, health and personal care.
Choice of power of attorney
For most couples, the natural choice for all forms of powers of attorney noted above is your spouse. This approach typically works well when you are younger and in good health. As our clients age we want to ensure that they are appointing an individual that is younger and in good health. An immediate family member (i.e. adult child) is a common option if possible and practical. In some situations, our clients do not have children, or the children are not good candidates (i.e. not trusted, non-resident). Other options are other family members or close friends that you trust. Your power of attorney would be entitled to be reimbursed for amounts they spend but you typically would not pay them. Many accountants, law firms, and financial firms can provide trust services. Within Scotia Wealth Management, our trust department is referred to as Scotiatrust. Typically, with accounting firms, law firms, and financial firms, they have trustees that act as your power of attorney. The compensation or fees would be agreed upon when setting them up as power of attorney.
Over the years we have encouraged our aging clients to bring their children in for a meeting with us. We act as a bridge to help with the communication and the executable steps that should be done to make sure their finances are monitored and taken care of, along with their medical, health and personal care.
Other steps to take
Having the above powers of attorney in place can help protect your spouse, parents, grandparents, close family friends and loved ones. Here are some additional steps you can take to prevent financial fraud from occurring.
If you have financial power of attorney and banking power of attorney, we encourage you to review the monthly statements and keep an eye out for any unusual transactions, large payments, uncharacteristic ATM withdrawals, etc. While this would only catch financial fraud after the fact, it could help prevent financial fraud from continuing. You can also set up banking alerts on your phone so that any time there’s a transaction in your account, or an account you have power of attorney on, you are notified immediately of it. If you do notice any transactions that appear out of the ordinary, talk about it with your loved one immediately and contact the financial institution if necessary.
Telephone scams are prevalent today. We wrote about measures to prevent unknown callers. If your friend or family member doesn’t have call control set up, we recommend helping them set it up. It can provide peace of mind to yourself and your loved one that fewer scam calls will get through.
Similarly, we wrote on the importance of not clicking on unsolicited email links. It’s important to educate yourself and your loved ones about the importance of not clicking on links that you weren’t expecting to receive, or don’t know who sent them. When in doubt, do not click.
If you think your parent, grand-parent, friend, or loved one may be susceptible to being taken advantage of financially, or to becoming a victim of financial fraud, we suggest adding some oversight to the power of attorney role by setting up two individuals to be power of attorney. For example, this could be a trusted family friend and a trust services company. By having it so that they have different interests and that neither can act without the other, it can add in an extra layer of protection (and an extra layer of complexity).
While there is no way to guarantee you or your loved ones will never fall victim to financial fraud, by remaining vigilant, being as involved as possible, asking questions, assessing if the answers make sense, and keeping up to date on the latest scams, you can work to protect yourself and your loved ones from financial fraud.
Kevin Greenard CPA CA FMA CFP CIM is a Portfolio Manager and Director, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250-389-2138, email greenard.group@scotiawealth.com, or visit greenardgroup.com.
