A reader recently had to start looking after the investment portfolio of his father, who is in his 90s and suffering from dementia. What he found is arguably a case of elder abuse.
In his late 80s and early 90s, this reader's dad was sold mutual funds with a deferred sales charge that kicks in if the investments were sold in the seven years after buying. "I consider this to be elder abuse," the reader said.
Agreed. This is predatory behaviour, an embarrassment to the entire financial advice industry and a lesson to everyone with aged parents who have investments. No matter how sharp your parents are, it can't hurt to have a second set of eyes look at their portfolio. The big question to be answered is whether the portfolio is serving the needs of your parent. Don't try to micro-manage the portfolio – just evaluate it to see if it more or less makes sense. See if the asset mix is reasonable. Monitor the securities in the portfolio to ensure they suit your parent's investment needs and charge reasonable fees. Try to get a sense of whether there's enough money in the portfolio to meet your parent's needs now and in the future.
The DSC story submitted by that reader suggests the need to be vigilant for out and out exploitation as well. The DSC sales option offers a higher initial commission payout to an adviser than funds sold other ways. In selling DSC to an aged senior, an adviser is clearly putting his or her own financial benefit ahead of the client's best interest. A typical DSC fund's redemption fees could range from 6 per cent in the first year down to 1.5 per cent in the seventh year. You don't need financial planning accreditation to see how inappropriate this is for an aged senior.
Some parents may welcome their children's oversight of their investments, while others may resist. If that's the case, frame your enquiries as an opportunity to compare notes on investments or get some ideas. You may find your parents are in good hands with their adviser, which means peace of mind for everyone involved.