How to Identify Diminished Capacity

I just finished a requirement of my Broker/Dealer and I thought this part of the course was important for you as Loan Officers of WSB Mortgage to also realize. Please focus on the best interest of our clients and prospects, if it was your Mother or Father, how would you like them treated?

How to Identify Diminished Capacity
A critical aspect of doing business with seniors is being able to identify signs of diminished mental capacity in senior investors. The ability to observe changes in investors' behavior places representatives in a unique and challenging position. There is widespread concern among Financial Professionals and their Firms about taking appropriate steps when an investor shows signs of diminished capacity, about Financial Professionals' responsibilities in these instances, and about their potential liability in instances where the Financial Professional does not address the issue.
Regulators have noted that Financial Professionals cannot take advantage of investors in a manner that would violate either an investment adviser's fiduciary duty to the investor or a representative's responsibility to follow just and equitable principles of trade. Firms have an obligation to supervise employees to prevent this behavior. In circumstances where the investor appears to lack capacity to understand an investment or to provide informed consent, you may want to consider taking certain steps, such as seeking advice from supervisors about contacting a trusted family member or the person designated in the investor's power of attorney.
Experts on the elderly who have studied this subject, as well as regulators as of late, have referred to the importance of identifying signs — or “red flags” — that may indicate that an investor may have diminished capacity or a reduced ability to handle financial decisions. Examples of signs of diminished capacity include, but are not limited to, the following:
• The investor appears unable to process simple concepts;
• The investor appears to have difficulty speaking or communicating;
• The investor appears unable to appreciate the consequences of decisions;
• The investor makes decisions that are inconsistent with his or her current long-term goals or commitments;
• The investor's behavior is erratic;
• The investor refuses to follow appropriate investment advice. This may be of particular concern when the advice is consistent with previously-stated investment objectives;
• The investor appears to be concerned or confused about missing funds in his or her account, where reviews indicate there were no unauthorized money movements or no money movements at all;
• The investor is not aware of, or does not understand, recently completed financial transactions;
• The investor appears to be disoriented with surroundings or social setting; and
• The investor appears uncharacteristically unkempt or forgetful.


How to Identify Elder Financial Abuse

Elder abuse comes in a variety of forms. It can be physical or emotional and can be in the form of neglect, abandonment, or through financial exploitation. Elder financial abuse is generally referred to as the misuse of a person's money or belongings by a family member or a person in a position of trust.
Similar to detecting diminished capacity, representatives are on the front lines of seeing indications of possible financial abuse and would benefit from being able to identify signs — or “red flags” — that may indicate that an investor may be subject to elder abuse. Examples of these signs include, but are not limited to the following:
• The investor gives a power of attorney to someone that, to the investor's Financial Professional, appears inappropriate;
• Indications that the investor does not have control over or access to his/her money;
• The investor's mailing address has been changed to an unfamiliar and unexplained address;
• Inability of the representative to speak directly to the investor, despite attempts to do so;
• The investor appears to be suddenly isolated from friends and family;
• There is a sudden, unexplained or unusual change in the investor's transaction patterns;
• There are unexplained disbursements made in an investor's account that are outside of the norm; and
• The sudden appearance of a new individual involved in the investor's financial affairs.