How to Help Aging Parents Manage Portfolios

Sooner or later everyone loses a step, and the results can be disastrous for older investors who choose overly risky holdings, forget to monitor their portfolio or fall prey to con artists.

At some point their children may feel it’s time step in with responses from the mild (making a few suggestions) to the intermediate (keeping an eye on accounts) to the extreme (wresting control from their parents’ hands). But how do you know when it’s time to take a role or how far to go?

Stacey Wood, a psychology professor at Scripps College in Claremont, California, who specializes in elder abuse, says these are delicate subjects.

“It can be a challenge to talk with aging parents about their finances and their potential to be the targets of scam artists,” she says.

[See: 11 Tips for the Sandwich Generation: Paying for College and Retirement.]

Wood recounts how her 86-year-old father was targeted for the “grandparent scam.”

“Con artists use Facebook and other types of social media to learn about a family member traveling out of the area or country” and pose on the phone as the grandchild needing money for an emergency.

“Older adults lower in numeracy — comfort with numbers — may tend to go with their gut in decision-making,” Wood says. “We have also found loneliness and depression increase the risk of financial exploitation. Changes in social circumstances, such as the loss of a spouse, greatly increase risk and vulnerability.”

Financial advisors say most people find it tough to explore a private matter like finances and investments, especially if either the parent or child feels things are getting out of hand.

“After losing the ability to drive, the most significant loss of independence a senior citizen faces is the ability to handle one’s finances,” says Liz Crystal, founder of The LC Group, a Green Brook, New Jersey-based money management and bookkeeping service for individuals.

Yet the problem is common as investors live longer and sit on portfolios amassed over a lifetime. It may take only a few mistakes to destroy the portfolio’s ability to cover the parents’ remaining expenses, or provide the bequests they’d hoped to leave behind.

Though control issues make many squirm, experts say the hurt feelings and hassles will often be worse if problems are left to fester.

So the first step, many experts say, is to be aware of signs of mental decline, but without jumping to conclusions every time the older person gropes for a word. It won’t help to make loved ones feel they are under a microscope and being constantly tested.

Crystal says signs of sloppiness should spur a closer look.

“If bank and investment documents have been left unopened, if checks are consistently written out of sequence, if the senior isn’t sure if a bill has been paid or if there are past-due notices laying around, or if there is an extreme amount of charity mail, it might be indicative of a problem handling finances or dealing with day-to-day financial matters,” she says.

Experts suggest that children edge into financial discussions gently, by talking about their own finances, investing moves and concerns to help put the parent at ease. It should be a conversation, not an interrogation. Pros suggest choosing a calm moment like preparing dinner or working in the garden, rather than creating a confrontation with a formal sit-down. Do it one-on-one so it doesn’t look like the younger generation is piling on.

[See: 16 Questions That Scare Investors, But Shouldn’t.]

After the grandparent scam incident, Wood say she started checking in with her father to talk finances.

“For example, I recently was in the market for a new car,” she says. “My father loves cars and enjoyed being consulted regarding my own financial decision, and for the most part he still has very good instincts regarding these types of transactions. By starting the conversation with my own finances, this opened the door to a broader conversation about money.”

Offer to look over the parent’s financial and investment statements to see if there are issues that need to be discussed further.

Kurt J. Rossi, president of Independent Wealth Management in Wall, New Jersey, suggests starting with a talk about estate planning.

“The adult child could simply start by stating that they had recently updated their will, power of attorney and living will and then ask when was the last time their parents had updated their documents,” he says.

Keeping it simple. If the first steps raise concerns, the child can make a few suggestions to make things run more smoothly, like setting up automatic cash transfers from the parent’s investment accounts to a bank account, and automatic bill payments from the bank. Helping with the parent’s tax return can also ease the parent’s burdens and allow the child to keep abreast of things.

The child can “register with the bank or financial institution to receive copies of bank and investment statements,” says Catherine Hodder, an estate-planning attorney and author of the book “Estate Planning for the Sandwich Generation.” “That way a child can monitor if there are any suspicious withdrawals or failure to pay certain monthly expenses.”

Stepping it up. What if the parent is showing clear signs of weakened abilities? Then it might be time to go further and, for instance, gain access to the parent’s accounts. It should be an offer to help, not a hostile takeover.

The parent may be willing to share passwords so that the child can monitor financial accounts. A child can sit in on investment conversations with financial advisors.

“A more official way (to step in) would for your parent to name you as their agent in a durable power of attorney document,” Hodder says. “That way you can show that document to any financial institution to get information and transact business on their behalf.”

Crystal says families can hire a daily money manager to handle routine tasks like paying bills. The Association of Daily Money Managers lists members on its website.

The nuclear option. At some point an older person may not be competent to handle financial affairs at all. Ill-advised investments or susceptibility to scams are a clear sign of vulnerability.

At this point the adult child can ask a court to make the child the parent’s conservator or guardian to take charge of finances and other matters involving the parent’s welfare.

[See: 8 Simple Rules for Investing in Retirement.]

“It is an adversarial proceeding,” says Nancy Ferraro, an attorney specializing in estate planning, probate and guardianship in Florida and New Jersey. “Most times, the court will appoint an attorney for the proposed ward, there would be a panel of medical experts to determine whether the person was incapacitated and to what extent.”

Like many experts, she says it should not come to this if earlier conversations have led to a power of attorney and other documents the parent has signed voluntarily.

“I don’t think it’s wise to wait until something has happened,” Crystal says. “My experience has shown that being proactive is a better approach.”

More from U.S. News

9 Tips to Conquer FIRE: Financial Independence, Retire Early

20 Awesome Dividend Stocks for Guaranteed Income

The Top 10 Investment Portfolio for Millennials

How to Help Aging Parents Manage Portfolios originally appeared on usnews.com