Practice Management Tips on Serving as Monitor for Aging Clients

mug martin shenkmanCPA practices, large and small, should retool to capitalize on new services the aging population will demand. The nature of services must change because CPAs, as the trusted adviser, will have a far more important role in protecting aging clients. While peak financial decision-making ability occurs at age 50, from age 60 onward there is a gradual decline in financial decision-making quality. By the time a client reaches his or her 80s and 90s there has likely been significant impact. Of even greater concern is that while a client’s abilities decline, the client’s confidence in his or her decision-making ability remains the same.1 The services and practice management changes might firms consider include:

√ Monitoring Services Generally

• Few firms focus much attention on providing and marketing financial monitoring services to clients, but all should.

• Elder financial abuse is a burgeoning threat to aging or infirm clients. Practitioners can identify clients that are aging or have health challenges. Often practitioners will simply know of these issues, and if not medical expense, age and other data in a Form 1040 might provide ample clues. But the reality of the data suggested in the introduction is that many clients will face these issues. Thus, the better approach is to offer services to all clients as they age so the odds of anyone becoming the next elder abuse statistic will be curtailed.

• Practitioners are already well skilled in reviewing accounts and identifying potential issues. These skills simply need to be packaged as a service to offer aging clients before financial disasters occur:

√ Firm Practice Decisions

• Determine how monitoring services will be provided, by whom and at what billing rates.

• Which departments will address these services? Some firms have high net worth family office departments which provide bill paying and similar services as really a luxury purchase. These services can be incredibly helpful to a wide array of new clients and can also open up new practice development opportunities.

• Can or should aging partners, instead of being subjected to mandatory retirement policies, be provided leeway to generate these services from the aging clients they have served for decades? Often long time family CPAs are the person of choice for many clients to serve as a trust protector or in other capacities. In those capacities it may be feasible to have the firm assist in providing the monitoring or other services useful to carrying out those duties.

• Should the firm hire a care manager to provide dollarization of care plan costs for aging clients or subcontract this work out to third parties? This input might be essential to financial planning for aging clients. Also, care managers can provide a valuable add on service to aging clients that might create benefits to the clients by integrating into the monitoring services.

√ Engagement

• Prepare new form engagement letters that clearly delineate what services will be provided, that there is no guarantee of detecting fraud, elder financial abuse or other anomalies, obtaining authority to discuss financial matters with a list of approved persons and authorization to consult with and disclose information to other key advisers (e.g., estate planning attorney, trust officer, etc.). As the array of monitoring services increases the options to be included in form engagement letters should grow.

• Determine who should retain you to provide the services. In some instances it may not be the client but the agent under the client’s durable power of attorney, a successor trustee under the client’s revocable trust, etc. There may even have to be multiple fiduciaries and the client each retaining the practitioner.

√ Automation and Bill Paying

• Review how the client’s financial accounts might be consolidated or simplified to make monitoring easier.

• Arrange for automatic receipt of electronic statements from financial institutions on a monthly basis. Be certain that this is authorized in the engagement letter and obtain whatever documentation each financial firm will require.

• Discuss with the client the advantages of electronic bill paying which you will monitor. Few clients realize the exposure a mailbox of bills and checks can create. While many clients might feel secure receiving and depositing checks each step in that process creates exposure that automation can avoid.

• Assist clients who are able and interested in automating their checkbook and other basic financial functions. Many older clients will simply not have the interest or ability. Guide these clients to the benefits of having the firm’s staff write up books electronically every quarter (or monthly if appropriate).

• Many clients as they age struggle to pay recurring billing. It can often be a simple matter for a practitioner to take over preparing bills, arranging for automatic bill pay of recurring bills. Ideally, setting up a continuum of services that is enhanced as clients age, will give the clients the least cost but most protective result. It will be far easier to take over bill paying for a client for whom you have maintained quarterly electronic records.

• Generate reports to the client of these activities so clients who fear losing control over their finances can be reassured they will actually have more control.

• Simplify and enlarge reports as vision issues for a particular client require, the reports sent to the client. Many clients struggle with vision issues to read and handle bills. Substituting that dilemma for a large print, simple format, report will often be incredibly appreciated.

√ Use Your Monitor Role to Guide the Client to Create Checks and Balances

• Arrange, and obtain approval in writing from the client, to submit copies of the periodic reports to another person. That other person might well include an agent under the client’s durable power of attorney (which authorizes that agent to act on behalf of the client if and when the client cannot do so).

• Build in checks and balances by having an independent family member other than the agent receive reports.

• Assess whether the client has subscribed to third party credit monitoring agencies, and if not whether such a service should be used. Obtaining periodic credit reports for the client may be an inexpensive and useful safeguard regardless of whether the client uses a third party service.

• Create procedures for a review of the bills submitted and the general financial data to which you are given access. For example, if new charges are being incurred perhaps they could be highlighted by a staff member calling the client to confirm and/or in a cover letter to the report. If account activity changes significantly from historic norms that might be a clue to elder financial abuse. The most common and easy to identify is a family member, home health aide or other close person taking an aging client to an ATM on too regular a basis.

√ Formalizing the Monitor Role

• Evaluate whether there is an advantage to the practitioner providing monitoring services in a more formal capacity.

• Should you or your firm be formally designated as a monitor in the client’s durable power of attorney and/or revocable trust? While this may not be necessary to the services you provide, it may assure that an agent or trustee seeking to do financial harm to the client might not terminate your involvement at the earliest opportunity.

“50 is Peak Age for Financial Decision Making,” Fox Business, September 18, 2015, Serena Elavia.

Martin M. Shenkman is the author of 35 books and 700 tax related articles. He has been quoted in The Wall Street Journal, Fortune, and The New York Times. He received his BS from the Wharton School of Pennsylvania, his MBA from the University of Michigan, and his law degree from Fordham University.

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