Senior Client With Suspected Diminished Capacity
An 83-year-old client has managed her own $700,000 portfolio for 20 years and has always been sharp and decisive. In the past two months, she has called four times to ask the same question about her account balance, authorized a $50,000 transfer to a "new friend" she met online, and told you her nephew should now be able to trade the account. She becomes agitated when asked about the transfer and insists the friend is a "business partner" in an investment that guarantees 15% monthly. Her trusted contact on file is her daughter, who has not been informed of these changes. The client has not been diagnosed with any condition, and she still signs documents clearly.
1. How should you balance the client's autonomy against the red flags, and what should you do about the $50,000 transfer?
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Autonomy is the starting point. The client has not been diagnosed with an impairment and can sign documents, so you should not treat her as incapacitated. But the red flags are serious: repeated questions about the same balance, a large transfer to a new online contact, a request to add a trading authorization, and agitation when questioned. The guaranteed 15% monthly return is a classic fraud indicator, and a promise of that size is not plausible.
On the transfer, you should slow the process rather than execute immediately. Ask her to explain the investment and the recipient, and document her answers. If she cannot provide basic details, or if the story is inconsistent, you may place a temporary hold under the firm's senior-investor procedures and escalate to compliance. You should not simply refuse and end the relationship, because that leaves her unprotected. The goal is to protect her assets while preserving her dignity and her ability to make decisions.
2. What role should the trusted contact and the nephew play, and what documentation should you create?
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The trusted contact is the daughter, and firm procedures generally allow you to contact her when you reasonably believe exploitation or diminished capacity may be occurring. You should not disclose account details beyond what the procedures permit, but you can raise a general concern and ask whether she has noticed changes. You should not contact her over the client's objection unless the firm's procedures and applicable rules allow it for suspected exploitation.
The nephew's request for trading authority needs a proper power of attorney or authorization document, and you should verify it independently. Do not accept verbal instructions. Document each call, the dates, what the client said, your questions, her responses, the transfer request, and the steps you took. Record the escalation to your supervisor and compliance, the hold, and any contact with the trusted contact. Clear contemporaneous notes protect the client and demonstrate that you followed procedure.