Ideas. Lessons Learned, and Occasionally, Opinions
New FINRA regulations that passed in 2017 will take effect on February 5. One major provision requires every broker-dealer to make a good-faith attempt to keep on file an alternate contact form for every client. This will function somewhat like the medical HIPAA forms, giving permission for a specific person who can be called if the client can’t be reached or there is an emergency. I’m delighted to see this development, as I’ve been calling for this protocol for many years as a way to protect both your clients and your firm.
I believe, however, that the FINRA rule is only a start. As you may recall, I developed a Corgenius Diminishing Capacity LetterTM. It goes beyond the minimum required for compliance with the FINRA rule, since it allows clients to name more than one person plus the powers of attorney and it gives broader permissions for contacting those in the client’s trusted circle when there is a potential problem.
My simple template is as follows:
“I, [client name], give [advisor names] of [company name and location] permission to call my Durable Powers of Attorney and the following people if they suspect any diminishment in my physical, cognitive, mental, or psychological capacity.”
The form then has space to list at least three people, with their names, addresses, relationship to the client, and contact information. Your clients sign and date it, and you keep it in their files. Every year, you revisit the form to see whether names or items of contact information need updating.
With this form, you have greater leeway, as an emergency or inability to reach the client is not the triggering factor. If you have noticed worrisome signs and suspect a problem in any of these areas, you have explicit permission to call others, including those the client designated as having decision-making power over financial and healthcare matters.
In that call, of course, remember not to make a diagnosis, i.e. “I think your mom might have dementia” or “Your dad appears to be in a serious depression.” Instead, list what you see. “I’m calling to let you know I observed some disturbing signs in my appointments with your mom. She asked the same question three times in 25 minutes, even though I’d answered it each time. She has been unable to follow multi-step directions and forgets decisions we made at the last appointment. There may be an underlying medical cause, and I want you to be aware of it so you or other family members can watch for similar things and take appropriate steps. In the meantime, I am contacting my compliance department to make sure we are protecting your mom’s financial well-being in case there is an issue with her capacity.”
Be sure to document your observations and the phone call itself as evidence that you are doing everything you can to protect your client. This may also help you connect to other family members, who see you as a comprehensive advisor who cares about more than just your clients’ money. Be a wise guide for your clients, even in cases of diminished capacity.
Picture this scenario, which gets repeated all too frequently:
A young man goes to college. Two months later he is rushed to the hospital and into the operating room for an emergency appendectomy. His mother calls the hospital in a panic and asks to know what is happening with her son. The hospital says, “I’m sorry; I cannot give you that information.” She says “But I’m his mother!” The response: “That doesn’t matter. For all of our adult patients, we can only give information to those authorized to receive it, and you are not authorized.”
You’ve educated your clients on the need for a Power of Attorney for Healthcare (aka healthcare proxy) for themselves, listing who can make their medical treatment decisions if they are unconscious or incapable of making those decisions. Clients may also be aware that HIPAA forms, which they regularly fill out at the doctor’s office when they have appointments, detail who can have access to their medical records.
What most clients don’t realize is that their kids need to have these documents in place as soon as they turn 18. Then they are legal adults, and no one gets access to their medical records or treatment information without express permission.
To avoid nightmare scenarios, take the following steps:
If the aforementioned young man had these documents in place, his panicked mother would have been given full access to his medical records and the details of his situation. She would also have had the right to make treatment decisions on his behalf while he was unconscious and unable to make them himself.
Especially given the state of our healthcare system, your clients and their family members need to take control of assuring who has access to medical information and the right to make treatment decisions. Addressing these areas with your clients helps you protect them and also extends your reach into the next generation. Any client who encounters such a situation will be forever grateful for your wise and prescient guidance.
Imagine a scenario: In the course of a regularly scheduled meeting, you notice that your normally astute and proper client has grown visibly thinner and isn’t dressed to the usual standard. You also observe disturbing memory lapses and mental mistakes, including trouble understanding the concepts you explain.
You express concern, ask the client about it, and encourage him or her to make an appointment for evaluation or medical assistance, but then what? Can you call a family member? How do you avoid violating privacy and confidentiality while still taking action you believe is in your client’s best interest?
There is a simple but highly effective way to resolve this dilemma that goes one step farther than the usual emergency contact forms that are standard issue in business: Ensure that each of your clients signs a Diminishing Capacity LetterTM. A simple template is as follows:
“I, [name], give [your name(s); company name; location] permission to call the following people in case of illness, emergency, or if they suspect any diminishment in my physical, cognitive, mental, or psychological capacity.”
The form then has space to list at least three people, with their name, address, relationship to the client, and contact information. Your client signs it, preferably in the presence of a notary public, who dates and notarizes the document. Every year, you revisit the form to see whether names or items of contact information need updating.
Once the Diminishing Capacity Letter is in place, you no longer need to worry about violating privacy or confidentiality. The client has explicitly given you permission to call specific people, not just for emergencies or medical illness, but also if you are concerned about their cognitive or mental state.
Making the Call
When you call, remember not to make a diagnosis, i.e. “I think your mom might be heading toward dementia.” While it is typical to think diminished capacity is related to aging or dementia, remember that there are other reasons for cognitive difficulty that have nothing to do with dementia, such as interactions of medications, infections, a vitamin B12 deficiency, emotional trauma or grief, and more. Regardless of the cause, it is always important to first talk to your client and then to follow up with their contacts if the client does not respond promptly and appropriately.
So rather than suggest a cause, simply list what you see. “I am calling to let you know that I have observed some disturbing signs when I am in contact with your mom. She asked the same question three times in 25 minutes, even though I’d answered it each time, and had trouble following a conversation that normally would be no problem. She also had to think for several minutes before she remembered her grandson’s name. I want you to be aware of what I’m seeing in case you or other family members observe similar things, and you may wish to get her to a doctor for evaluation of the cause.”
Be sure to document your observations and the phone call itself as evidence that you are doing everything you can to protect your client in all aspects of life. Be a wise guide for your clients in all the situations they may encounter.
When your client dies, who owns the pictures on their Facebook page? Who has control of their electronic bill-payment sites or Bitcoin account? Who is responsible for shutting down or memorializing social media sites? Digital rights ownership is an increasingly complex issue as our online lives continue to expand. Are your clients prepared to safeguard these assets after they die?
If your client does nothing in advance, disposition of digital assets goes according to the TOS (terms of service) of each individual site, which vary widely. In fact, many survivors have been shocked by sites that do not allow transfer of ownership or access upon death, or that complicate the settlement of the estate. Rules have been more flexible for minors in states that allow parents or guardians to manage deceased children’s accounts. Yet some families have had to get court orders to obtain rights to their loved one’s digital accounts, a process that can take months or years.
The Fiduciary Access to Digital Assets Act
Several states began to take action by passing a Fiduciary Access to Digital Assets Act. This gave the executor access to all digital accounts and allowed digital assets to pass according to the decedent’s will. However, it ran into legal trouble based on privacy. Some people, for instance, did not want their executor to see highly personal information such as their history of emails and texts, and lawsuits ensued.
The acts were gradually amended to resolve these issues until finally, in 2017, states began passing the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). (http://www.uniformlaws.org/Act.aspx?title=Fiduciary%20Access%20to%20Digital%20Assets%20Act,%20Revised%20(2015). Forty states have now made it law, and it’s pending in five more plus Washington D.C. It will soon be nationwide. What does this mean for financial advisors and estate planners? Digital property now needs to be part of the estate planning process, and you need to help your clients prepare now for their digital afterlife.
Access to Digital Assets
RUFADAA allows the executor or another fiduciary appointed in the will to have access to any electronic or digital sites “necessary” to settle the estate. The necessary sites are largely those involving finances or financial assets, including shopping accounts, automatic bill-paying, online banking, etc. That very narrow provision protects privacy, as it does not allow the executor to access texts, emails, and more private information.
Yet RUFADAA allows for further permissions if the decedent clearly states so in the will. These permissions can cover desires such as whether a Facebook page is closed or maintained as a memorial page, whether a blog is deleted or archived and kept, and all your client’s other desires for digital sites.
Sites that fall under RUFADAA are required to give access to the named fiduciary or executor, but that process can take time and involves proving to the site that the client died. If usernames and passwords are accessible immediately, airline miles can be transferred, sites can be closed, and other desired actions can happen with less complication. It is important to note, though, that clients should never include usernames and passwords in the will, as it becomes a public document upon death.
Your Two-Step Process
There are two crucial steps to take with your clients:
1. Ensure the will includes your client’s intent for the executor or another named fiduciary to have access to digital accounts, how broad those permissions are, and your client’s wishes for disposition. Example: Can the named person see all the tweets, emails, and private personal information, or does access only extend to closing such accounts? What are your client’s desires for each site or each category of sites?
2. Ensure that your client completes another document giving more specific instructions (i.e. to whom they wish to transfer their airline miles and hotel points), and including usernames and passwords. This document should be signed, dated, and preferably notarized, and kept with the will so instructions are accessible to the executor.
To facilitate this, recommend that clients use one of the available services (i.e. LassPass.com) that generate secure passwords for every site and store the entire array of information necessary for access. The document then only needs to include the master password to that service, plus instructions for any two-factor authentication, so the named fiduciary can easily open the entire vault of usernames and passwords. Since the password storage service is dynamic, it also allows clients to maintain security by changing passwords regularly, without having to re-do the document.
Instead of allowing individual sites to determine disposition, take these steps to keep your clients in control and remove at least some post-death headaches. They will never forget it!