One afternoon, Julie McGuire, a CFP with Assante Wealth Management in Abbotsford, B.C., got a phone call from a client who wanted to cash in all of her term deposits.
McGuire started to wonder if her client really wanted the cash out, since the person on the phone was the client’s eldest son saying he now represented his mother under a power of attorney.
“I tried to reason with the son that it wasn’t financially prudent to withdraw all the money, that it would have a significant consequence to the portfolio,” she says. But the son was adamant the money be released to him; and offered to present a doctor’s note stating his mother had dementia.
“I took the stance that he acknowledge in writing that he’d be responsible for any losses or penalties to the portfolio,” says McGuire.
The son started to back off.
She then got a call from her client’s other son claiming his brother was stealing—the brother had used his POA to get his name on the title to the mother’s house and to buy a van, among other things.
McGuire insisted on meeting with her client to judge the situation for herself: “She was certainly competent enough to understand her son had been taking her money.” But in order to revoke the rogue son’s POA, the other son was forced to make a costly court application to become his mother’s committee (as it’s known in B.C.) or adult guardian (Ontario).
Years later, the mother needed more extensive in-home care. Working in collaboration with the good son, McGuire came up with an investment product that would let her client remain in her home provided she held clear title. But the bad brother still had his name on the deed, so the good brother again turned to the courts to get his brother removed from the title.
The client was able to stay in her home until her dementia got so bad she needed to go into a private care home, which would cost $7,000 a month.
As the battle between the two brothers raged on, a third brother, estranged for three decades, joined in with his own lawyer. When the two deadbeat brothers found out McGuire was suggesting the client purchase of an annuity to pay her private home care expenses, they vehemently opposed it, forcing judicial reviews.
McGuire had to prepare a financial submission for the court, leading the judge to order the annuity’s purchase. McGuire, who advised the client for 10 years until her death, says she felt good about helping the good son navigate the troubling time—especially since he got no help from the police, B.C.’s Public Guardian Trustee’s Office, MPs, or the Attorney General.
Government stats estimate as many as 10% of seniors are victimized by elder abuse, and financial abuse is the most prevalent. Lynne Butler, a lawyer and estate planner at Scotia Private Client Group, says safeguards against POA abuse remain woefully inadequate.
“One of the reasons POA abuse is rampant is because holders of powers of attorney often operate in the shadows,” she says, noting most standard POA documents aren’t designed to catch rogues. So only those who know the victim well can spot the abuse.
Often, advisors are in that group.
“I have had so many clients who have been abused by their kids over the years and had their monies taken away,” says Sue Foley, a CFP and retirement specialist with Hartry Foley Financial in Oakville. She says she’s seen adult children do everything from triggering invalid capacity assessments to cutting the parents off from all communications with anyone who might intervene to help.
Victims of POA abuse often have to resort to civil litigation; which means advisors often are dragged into court as witnesses; and sometimes named as defendants. This, says Rona Birenbaum, a CFP with the Toronto firm Caring for Clients, means advisors who’ve done nothing wrong from a fiduciary or compliance standpoint will still have to defend themselves. That can be insulting, financially taxing, and a waste of time.
Advisors quickly realize they’ll need to fend for themselves when dealing with POA abuse.
“We can’t even depend on best practices to help us,” says Alan Atkins, a CFP and CPCA, president of NetWealth Consulting in Barrie. “I talked to my dealer, the compliance people, and my association on how to handle this situation and there was no clear answer; lack of best practices leaves us vulnerable to unwittingly becoming an accomplice to the misdeeds of a rogue POA.”
Establishing best practices, he adds, would create an advantage for advisors required to defend their actions in court, since they’d be backed by an entire industry.
Leona Tranter, who directs Standards Enforcement for the Financial Planning Standards Council, acknowledges that POA abuse is a complicated area. She adds, “One of the challenges of constructing a set of best practices is that you are also dealing with a legal obligation in the face of a valid POA.”