Professional Care to Become More Important as Clients Age

How do you define great advice? What services do you need to receive from your advisor that would compel you to recommend them to your friends and associates? In the tax business, that particular sweet spot occurs when the client says thanks and “see you next year.” But what happens to the standards of professional advice when a client’s health changes? Consider the following true-to-life scenario as an example. 

A client had two investments maturing:  A TFSA not yet at its maximum contribution room and a GIC for a significant sum. The financial advisor called the client to discuss reinvesting the money for both investments, offering a longer term for the GIC at a higher rate of return. This was agreed to, and the existing TFSA principal was reinvested for another year.

Anything wrong with this picture? Here is some additional information: the client in question was a senior with failing memory. At some point after the investment activities took place, she called a family member in a panic, asking for help with the reinvestment of the maturing funds.

Upon calling the institution, it became clear to the family member that the reinvestment had already been authorized by the elderly client some time ago. Problem was, she had no memory of the activity.

The family member was also puzzled and concerned about several questions posed to the advisor:

• Did the institution discuss whether there were changes in the client’s personal life to determine whether any of the money was needed for another reason and when?
• Was the longer term on the GIC reasonable, given the client’s lifecycle changes?
• Should some of the principal from the GIC be used to top up the TFSA investment for a better after-tax return? Clearly the maximum TFSA contribution room had not yet been met.

This is a scenario that could happen to any advisor. What is the acceptable standard of service for a professional financial advisor in these circumstances? Who should the advisor communicate with? Are instructions simply to be taken from the client, or should more effort be put into setting up a multi-stakeholder approach to consultation and advice before investment decisions are made? When is the right time to do so? What is the next course of action? It’s a difficult situation for all involved.

Professional financial advice must include putting the right investment into the most tax-efficient investment vehicle for a period of time that matches the client’s objectives and lifecycle considerations.

However, this all becomes much more difficult when age-related factors present a significant obstacle to achieving optimum wealth management results, especially considering that privacy rules prohibit the advisor from speaking to anyone but the client.

It’s an issue that’s worth thinking about, given our aging demographic. Grappling with how to solve it will take a new approach to professional care. But what should that approach be? Your own stories or thoughts on the potential solutions would be welcome.

Evelyn Jacks is President of Knowledge Bureau, Canada’s leading educator in the tax and financial services, and author of 52 books on family tax preparation and planning.

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