The governing bodies of the investing world, the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) place high importance on protecting senior citizens. All too often, senior citizens have suffered the brunt of elicit action of financial services professionals. Because of this, the SEC and FINRA jointly issued a National Senior Investor Initiative.
Among many things, this initiative provides guidance to investment professionals on how to care for anyone who suffers from diminished financial capacities. Diminished financial capacity puts individuals at risk of financial abuse and investment fraud.
“Diminished financial capacity” is a term used to describe a decline in one’s ability to manage money and financial assets to serve their best interest, including the inability to understand the consequences of investment decisions.
You don’t have to wait for an investment professional to take care of such matters. There are steps you can take for yourself or loved ones to reduce financial abuse before diminished financial capacity starts.
Below is a combination of SEC, FINRA and Debt Free Guys’ guidance to protect yourself and your loved ones.
- Organize and consolidate important documents, such as bank and brokerage account statements, mortgage and credit information, insurance policies, pension and other retirement benefit summaries, and social security payment information
- Create a will, living will and advanced directives
- Assemble in one location contact information for financial and medical professionals,
- Provide emergency contact information to your investment professionals,
- Consider opening a durable power of attorney*,
- Obtain the assistance of a trusted family member or friend,
- Update and maintain all important financial information (i.e., bank and brokerage account information and contact people), and
- Update and maintain beneficiary information on all accounts
* A durable power of attorney lets someone whom you designate to act on your behalf for financial, business or other matters even if you become incapacitated, i.e., suffer diminished financial capacity. Most other powers or attorney cease when you become incapacitated or die. Durable powers of attorney continue until your death, despite your mental state.
By following these steps, you reduce the risk of either you or a loved one being the victim of investment fraud or financial abuse. While it’s not a topic anyone likes to discuss, doing so can reduce the risk of losing money in your last few years of life or leaving a mess for your heirs and beneficiaries to clean up after you’ve gone mentally or physically.