#relationshipscams | #dating | Financial planning in the age of the centenarian

The American baseball player Satchel Paige once posed the question: “How old would you be if you didn’t know how old you are?”

We naturally form assumptions about age based on numbers. In a way, that makes sense. It is a fact that we slow down, mentally and physically, with age. But these assumptions can be taken too far and pigeonhole the elderly.

It is true, for example, that many who make it to age 100 will suffer from conditions like dementia and need a power of attorney to manage their finances. But it is also true that there are many centenarians who remain self-reliant.

Advisers must be careful when they deal with clients who reach such milestones, as questions about mental capacity inevitably arise. According to the NHS one in 14 people over the age of 65 have dementia, and the condition affects one in six people over 80.

It is also an issue that advisers are likely to encounter more in the future, as the percentage of the population aged 90 and above keeps growing. The latest figures from the Office for National Statistics show there were 13,170 centenarians in the UK in 2018. The number of people making it to 90 increased 0.7 per cent to 584,024 in 2018.

While Japan has three times as many female centenarians as the UK, these numbers are not insignificant in an international context (see tables).

Covid-19 has introduced an additional complexity to financial planning as the oldest clients are required to shield indoors. Vital information gathered from previous face- to-face visits is not possible any longer and has to be done online. There has also been a sharp rise in coronavirus-related scams targeting the elderly. All this creates considerable challenges for the adviser and client to tackle.

Bridging the gaps

Money Marketing asked 17 major advice firms what percentage of their clients are aged 100, and how they have adapted their practices to serve these during the pandemic. Four firms replied: LEBC, St James’s Place, Quilter and Sanlam.

Sanlam says 1.7 per cent of its clients are over 90 and account for the same proportion of annual revenue; Quilter has 10 clients that are over 100 within its national advice business; LEBC has 24 clients over age 100 and 240 over age 90; and SJP has 210 clients over 100, or 0.03 per cent of its client base.

All of them say cashflow modelling can reach age 100 and is a useful tool, but taking account of personal circumstances is just as important.

SJP commissioned research that examines how Covid-19 has altered the practice of advice. It surveyed 10,000 UK adults and 2,000 fund investors with further interviews carried out with respondents at different life stages. While the sample is not broken down by age, it shows how the pandemic has made clients reassess how they want to work with their IFA.

Almost a quarter say the Covid-19 outbreak has changed what they want from their adviser. Clients now require more frequent and proactive communications with updates on portfolio performance as markets move quickly. The traditional annual review is also not enough, as clients prefer ad-hoc video calls and short updates. Nearly two-thirds now feel more positive about video calls over Skype, Zoom or FaceTime as a means of communication with their adviser.

These numbers evidence advisers’ anecdotal beliefs: just because a client is old does not mean they are unable to learn how to use technology. In fact, a majority of older clients have adapted surprisingly well to communicating via technology, while a minority have not. The move to online communication is also a test for advisers as they have to show empathy and compassion virtually now.

Clients are not numbers

Advising older clients in their 90s or centenarians in a pandemic requires a special set of skills, according to Society of Later Life Advisers founder Tish Hanifan.

Hanifan says there are four types of client situation an IFA can face with very old clients: the client retains mental capacity and the adviser deals with them personally; the adviser deals with a power of attorney chosen by the client in the event they lose mental capacity; the client fails to choose a power of attorney when they had mental capacity and has a deputy assigned by a court; or an adviser has a client who is happy to have a power of attorney involved in the decision making.

Hanifan adds: “No good later life adviser should work with older people unless they understand the issues of mental capacity and substituted decision making. The older they get they are more likely to have powers of attorney making decisions. It is increasingly important they understand their client alongside the powers and limits of the attorney.

“I find advisers may know what a power of attorney is, but a lot of them do not know enough about it. This is really important, because as the population ages advisers are more likely to deal with clients with a power of attorney.”

Apart from being up to do date with legal knowledge, advisers must also translate their soft skills into the virtual world. This is hard to do when one cannot read the body language of a client as easily and physical cues are more likely to be missed. Another dilemma is the rise in scams during the pandemic that can be hard to spot during a call.

Hanifan says: “You would be surprised by the number of people who look at themselves rather than the camera when they speak to people on a teleconference. Financial abuse is also something you need to be aware of on calls with clients. Is the client under any pressure or is someone in the room with them?”

The only caveat to the embrace of technology during the pandemic is there remain clients who are unlikely to start using it. For this group, advisers may have to communicate in old-fashioned ways, not because the client lacks mental capacity, but because it is what they know and so advisers must work at their pace.

Hanifan gives the example of one client who died and their cousin was the executor of the will. He is 93 and capable of doing will duties, but partially deaf. That means Hanifan has had to be patient and call him five times to get hold of him. Everything takes a bit longer, but that is to be expected.

The importance of not seeing clients as numbers or being dogmatic in your approach is supported by CanScot Solutions principal Rob Reid.

He asks: “How do we determine vulnerability so the client is not offended about what we ask? Offence is one of the things you can give the older the client is. Instead of the narrow regulatory focus, the better way to do things is to look at people generally and evolve the discussion from there.

“It also means you don’t have any pejorative comments that emerge from subject access requests. In dementia, for example, people have either understood the situation and accepted it or they are in denial.

“You are not going to get a good reaction if they see a comment about an issue they are sensitive about. Also, you cannot take numbers on face value as they are arbitrary. My mother’s brother is 96 and he is the oldest member of my family. He can use Zoom and a mobile. Then I have a client who is 55 and he finds it hard to scan a document.”

Expert view

IFAs can help centenarians enjoy themselves

The average life expectancy has increased dramatically over the past couple of decades. As a result, more people than ever before are living beyond their 100th birthday, and this presents challenges about how to manage their finances. People within this age bracket, even if they were affluent at retirement, are likely to have been out of the employment market for more than 30 years.

Their savings may well have become depleted and their income from pension schemes may have lost some of its buying power relative to earnings. For a significant number of centenarians, state benefits and assistance with care may become more of a concern.

People over the age of 100 are much more likely to be frail and need at least some form of care and assistance. Advice on access to care and state benefits will be an important consideration for them. They will need to be aware of how they stand in relation to the means-testing rules on capital and savings.

In terms of investments held by people aged over 100, any money that they have put aside for themselves should have been moved to cash by now. Investments are for the medium term, and if anyone has earned the right to spend their savings without holding back, it is the centenarians.

But for those who are still fortunate enough to have savings that they want to pass on to children, grandchildren and great grandchildren, more complex tax advice on inheritance and gifts may still be worthwhile.

All in all, once people have reached this splendid age, they should have long been in a position to enjoy some r-and-r. When it comes to their financial advice, it should focus on getting them all the help and income available, and enabling them to spend it. If they haven’t done the longer-term planning by now, they’ve earned the right to skip it.

Keith Richards is chief executive of the Personal Finance Society

Ashlea Financial Planning director Diane Weitz has been “staggered” by how clients who she never thought were computer literate could adapt so well.

She says: “A lot of old clients have a sense of achievement when they learn how to use Zoom. I had a lady who had care in her home until the end of her life. She was in the Air Force, met the Queen Mother and rode horses. She was a very substantial person, but the care she received was varied.

“People of that age have been through a lot and they deserve to be acknowledged, as they have thoughts and feelings, and they can make a valuable contribution.

“We have an old friend who is 99 and worked in the tax office. He made the decision at 60 he would not have a computer, but he is the most intelligent man and has a really close relationship with my grandchildren.

“They have nicknamed him ‘Google’ because he knows so much. He is so well read and still reads three or four books a week. That is what keeps people young. They live longer if they keep an interest in young people and the mind sharp through learning.”

National IFA perspectives

While these insights from IFAs about their individual interactions with older clients are important, the national advice firms must take a more collective approach to them. All their processes vary slightly and make for useful comparisons.

SJP expects clients over 85 to be accompanied by a third party who receives copies of the advice/suitability letter. Their long-term care accredited advisers are specifically required to have specialist qualifications. SJP uses the cashflow tool Voyant that can be set beyond 100. A planner at SJP would usually set a cashflow plan to 100, while some other planners use life expectancy.

SJP technical connection director Edward Grant says: “Many advisers have been able to use virtual family wealth planning meetings to bring the family together on regular calls. Anecdotal feedback has been that it has been easier to bring the family together on a call, especially where they are across multiple locations. Age has not been a barrier to virtual meetings. Many advisers were also undertaking more social support, such as partners bringing puzzles with them and doing social check-ins.”

On the technical aspects of financial planning for the elderly, there is no clear-cut answer. The usefulness of cashflow modelling and medical reports when advising a centenarian depends on their situation.

Finalytiq director Abraham Okusanya says cashflow modelling for a 100-year-old client could add some value, but should not be elaborate.

On the same question, Sanlam wealth planning director Richard Vassey says: “If there is a funding need for long-term care, then we would look to produce something to underpin the advice and give an indication of how long the client’s assets would last, modelling different growth rates, for example.

“But in other scenarios, it may not be required and could just confuse the situation. Considering a client’s understanding and ability to concentrate for extended periods is important.”

On medical reports he adds: “Potential longevity will always be an important consideration, either in relation to the window available for investment, or in relation to how long an income stream will need to last.

“Dealing with clients in this age bracket means there is more inherent uncertainty than with other clients. Things are more likely to happen unexpectedly and quickly, such as falls, strokes and heart attacks.”

A client case study from a Quilter financial planner

I have one client who has just had her 100th birthday, but what I can say from experience is no one client is the same. While we can draw generalisations based on age, it is vital to remember every relationship is different.

This particular client is an experienced investor, having held a range of investments for a very long time. Over the past four to five years I have been advising this client with her son present. It is an open conversation on how her portfolio performs and whether it is still suitable for her needs and objectives.

I was due to meet with her and the son recently but, unfortunately, she had a fall the day before her 100th birthday and was hospitalised. She is currently in rehab and back in good spirits, which is pleasing to hear.

I always prefer on meeting elderly clients face-to-face with a third party present if necessary. In that respect the current Covid-19 environment has obviously been challenging.

But for those elderly clients that I have a long-term relationship and rapport with, and that I feel are comfortable doing so, we have communicated over the phone. I would not be willing to do that with ‘newer’ older clients where that rapport is not quite there yet.

The three greatest concerns regarding older clients, according to Vassey, include getting a decent return on the assets that they want to pass on to future generations, inheritance tax as there are limited options due to age, and long-term care considerations.

He says the advantage of third parties being in attendance is that they are able to assist the client with their understanding. This can either be a family member or power of attorney.

But he adds: “Having worked with clients for a long time to structure things as well as possible, it can be frustrating to see steps being taken once an attorney takes over. They might not continue with the course we’ve taken when it remains the most effective approach, simply because they’re not familiar with the long-term planning.”

LEBC says it has a number of policies in place to spot and deal with mental capacity issues. Many older clients have a power of attorney in place and it also encourages them to include family or trusted friends in discussions.

The firm has also established a vulnerable clients’ working party that continuously looks at ways it can improve the advice for those who are vulnerable.

This group refines best practice and provides additional help to advisers through continuous professional development. It has an online support forum of advisers, paraplanners and technical experts who help colleagues with challenging scenarios involving the safeguarding of clients.

LEBC director of public policy Kay Ingram says: “We have planners who are members of the Society of Later Life Advisers who specialise in matters affecting older clients, such as long- term care provision and sensitivity to those with cognitive decline – for example, Alzheimer’s or Parkinson’s disease.

“We are also members of the Equity Release Council, which sets additional safeguarding standards when dealing with older clients, including referral to a solicitor for independent legal advice.

“One of our advisers has undertaken special training to become a dementia-friendly adviser and is helping others in the group through training to gain awareness of the issues faced by clients whose cognitive ability may be impaired.”

Ingram also believes doing cashflow planning for a client up to a 100 has merit, as funds will cover needs from informal help to residential nursing care.

In turn, if the client plans to gift funds to younger generations, it is important to stress test the affordability of doing so. Failure to do this could limit the choices they have in choosing appropriate care. It could lead the local authority to refuse help with care costs on the grounds of deliberate asset deprivation.

Ingram adds: “IFAs also need to safeguard older clients from being put under pressure by relatives who may seek financial assistance without realising the older person cannot afford to be so generous.

“Cashflow is an invaluable tool for attorneys, enabling them to validate their decisions in the face of potential criticism from others or the Court of Protection.

“For wealthier individuals who can afford to make lifetime gifts, it can also demonstrate to HM Revenue and Customs that gifts are from surplus income and therefore exempt from IHT.

“Many of our older clients are supporting younger generations, for example, funding education costs, so factoring in the age of grandchildren and when their education will end can be important.”

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