Helping Advisors Work With Senior Clients

In this episode of Middle Class Millionaire, John discusses key considerations for financial advisors working with senior and elderly clients. He highlights the importance of trusted contacts, long-term care planning, and maintaining proper documentation to protect both clients and advisors. John also explains common estate planning pitfalls- such as unfunded trusts and missing documents- and how advisors can help families avoid unnecessary probate, confusion, and financial stress. 

WAYS TO CONNECT:

Website: https://www.johnchoi.net/

Phone: 847-247-0850

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Transcript

SPEAKER_02 0:02

This week on Middle Class Millionaire, John's going to discuss with us what it's like working with elderly clients for advisors. So if you're a CFB out there and you're getting started into your practice, this could be a great conversation for you.

SPEAKER_00 0:20

Becoming a millionaire isn't just about growing your money, it's also about protecting and preserving your wealth by using the right financial strategies for your situation. Welcome. This is Middle Class Millionaire. With John Choi, John has his Masters of Science in Financial Services and is a certified financial planner and the president of Epiphany Capital.

SPEAKER_02 0:43

Hey everybody, welcome into the podcast. This is Middle Class Millionaire with John Choi, certified financial planner and instructor for the CFP program and president at Epiphany Capital. And this week, John, you wanted to kind of talk about what it's like and some tips and pointers and things to think about when working with, you know, seniors and elderly clients as an advisor. So how you doing this week? Doing all right?

SPEAKER_01 1:05

Yeah, I'm doing great. And the weather's great in February right now. We had a really bitter cold January. Yeah. But it's uh warming up. My my wife goes, Do you think we're in spring? I'm like, sweetie. No. No. Nope. It's just an ad fake.

SPEAKER_02 1:18

Yeah, exactly. Uh yeah, here, you know, my neck of the woods, uh, coldest it's been in about 10 years. And so we're actually quite warm today, too. And I think there's another cold snap coming around the corner. So we shall see. But we shall see. You know, we'll with that on the side, uh, and that's just the way the way it goes with the weather. What about this conversation today, John? What's some things you want to share with the listening base?

SPEAKER_01 1:41

I would say that in a typical advisor that works the majority of their clients are gonna be over 50. I'm talking about clients that are in their 70s and older and up. Okay. And we have we're gonna have a good portion of our book with senior clients. I'm gonna call them senior clients, people who are in their 70s and up. And the first thing that I would say with any senior client is to have some sort of a document that's called a trusted contact. Your firm would have that. And that just allows us to speak with a trusted contact, like their son, their daughter, you know, another family member, a younger brother, sister, but someone that you know would be a little bit younger than them, that there would not be any thoughts of any mental or incapacity issues, okay. Yeah, where anyone's trying to take advantage of them. So it's kind of like a check-and-balance system because without the trusted contact document, you really can't blab about their situation. It would be a breach of the duty of confidentiality that we have as CFPs. So I think that's really important, and they really like it. The daughter, the adult son, the adult daughter really like it. The only pushback that I get from really elderly clients is I don't want my kids to know how much money I have, but I'm like to say they're gonna find out anyway, sooner or later. So I don't think that's a good strategy.

SPEAKER_02 3:18

Yeah, and it's tough, right? So when you're talking about that age group, you know, a lot of them have been conditioned to not open up and talk about finances and stuff. So that's something that kind of again, we talked about behavioral management quite often. That's another piece to kind of work with on saying, look, you know, at some point you've got to bring the kids in on this conversation, especially when it comes to, you know, the the legacy planning and you know, elder care, so on and so forth.

SPEAKER_01 3:44

You know, if they're in their 80s and they won't allow me to have a trusted contact on file, I'm not gonna work with them. It's there's just too much liability.

SPEAKER_02 3:51

Yeah, great point. Yeah. Is is that a fairly easy document for seniors to do that? Yeah, yeah, yeah.

SPEAKER_01 3:57

Or, you know, you just get a get a signed letter to say, you know, from the client to say, hey, you are allowed to speak about all my financial matters to these people. Right. And you just get their permission, you have it, like I said, signed, dated, and you keep that in your file, and you know, off we go.

SPEAKER_02 4:16

If you're a young advisor, young CFP getting started, building your book, so on and so forth, what's some tips or thoughts to think about as you're kind of pulling this, you know, the client base in when working with somebody who's you know 55 to 65 versus somebody who's 70 to 80?

SPEAKER_01 4:30

You know, long-term care is always an issue. Uh, I think that's very important. And some people are like, I don't want long-term care. That that's fine. I always have them sign a document that says you've been offered long-term care. You are declining any long-term care. And they go, Well, why do I got to sign it? I said, Because I don't want to be sued by your children. When you go through all when you go through their inheritance and they look at me and say, Why didn't you sell uh long-term care to mom and dad after they've you know demolished their portfolio and I got nothing? I'm gonna say, I did. They refused. Here's the letter.

SPEAKER_02 5:10

Yeah.

SPEAKER_01 5:10

And you always want to, you know, operate from a defensible position. And I think that's again, it's uh good practice to have.

SPEAKER_02 5:18

Okay. Uh what else? So thinking about working with you know senior clients, uh one of the some of the major challenges besides those couple that you highlighted. Uh yeah.

SPEAKER_01 5:28

So uh one of the things that really came into mind lately is I had a client that passed away unexpectedly, and the surviving spouse had said and this is twofold. Number one, the the deceased spouse took care of all the finances, and the surviving spouse was the non-financial spouse.

SPEAKER_02 5:50

That's usually the way it gets.

SPEAKER_01 5:51

And it comes out it turns out that the financial spouse who had unfortunately passed away, they hadn't filed their taxes in five or six years.

SPEAKER_02 6:01

Oh no.

SPEAKER_01 6:01

And I was like, what? And um, you know, because they didn't engage me at that level. And uh and I did ask them for their tax return. They didn't provide it, so I was just like, okay, I don't wanna I don't want to be that annoying guy that just keeps you know asking them and asking them and asking them. I did ask them, but she's like, I'll get around to it when I get around to it. Like, okay. But it finds it, I find out that she hadn't filed the taxes, and I think a lot of senior clients think that they don't have a filing requirement because I don't know.

SPEAKER_02 6:35

Because uh I don't know why they don't think if it's social security only, yeah, you don't at a certain point, right?

SPEAKER_01 6:40

But at a certain point, but you know, you again talk to a professional, talk to an accountant, and say my mom is a filing requirement.

SPEAKER_02 6:48

Yeah, my mom is 84, John, and she hasn't had to file for a number of years now, but she's on Social Security only, right? So there's some criteria there. So yeah, it's not just a unfortunately it's not a given, right? We don't get to 65 and they say, hey, you're in a lower tax bracket forever, or you don't get to 75 and they say, hey, you're tax-free forever, right? So you have to make sure and and dot those eyes. So okay, that's a good point as well.

SPEAKER_01 7:12

And and and just to weave into that, do they have their estate documents in order? Do they have their wills, their trusts? But more importantly, do their children know where to find the documents?

SPEAKER_02 7:23

Yeah.

SPEAKER_01 7:24

You may have a beautifully written document, but if we can't find the wills and the trusts, it's like uh it's it's chaos. And we don't want any fire drills when the time comes. And uh another thing that I would say is is there are their trusts funded? That's one of the biggest things that I've seen as a mistake. I hear that all the time. They have these beautifully written trusts, and there's ten dollars in it. They've never funded the trust. And so I think it's incumbent upon the advisor if we're doing full financial planning, not just doing investment management, which is not financial planning, but just a piece of it, that we have this conversation to say um, hey, are your trust funded? And it's really, really easy to suss that out by creating a balance sheet for them, which we should be doing. That's the first thing I do is create a balance sheet for a client.

SPEAKER_02 8:17

Gotcha. So when you go to an attorney and and to get that trust built, you know, John, as a as a client, they're not probably going to talk to you about that. Maybe some do, right? And of course, that's not they're No, they do.

SPEAKER_01 8:29

They just they they say, here, here's a trust, now go fund it. And they're like, okay, they they have no idea what that means. Right. Some financial advisors don't know what that means.

SPEAKER_02 8:36

Gotcha.

SPEAKER_01 8:36

Okay. And so that's nod their head, they sign the document, they go, okay, uh, don't forget to get your trust funded, like, okay, and then they just you know stick it in a sock drawer and then they forget about it.

SPEAKER_02 8:47

So it's basically kind of worthless at that point, right? If you don't fund it, it's worth it.

SPEAKER_01 8:51

Yeah, you you have a beautifully written trust that's gonna divvy up ten dollars.

SPEAKER_02 8:55

Gotcha. Okay. And that goes, and is there different elements to funding it? Is it like if you're doing like the leaving the house behind or like uh maybe a vacation property or something where you want to maybe fund that specifically with a certain amount that's for property taxes or whatever for the family in the future, things of that nature, or is it all like one communal pool?

SPEAKER_01 9:15

Well, I mean, the reason why I want to put uh you know most things in a trust, if not everything, is I don't want to probate a state. I don't want the judge to say that this will is valid and you gotta go through the probate process. Right. Because probate is gonna it's gonna have publicity, delay, and costs. And I say, here's the alternative. Do you want it private, quick, and low cost? Like, yeah, I'm like, well, then you gotta get get a trust and and fund the trust. So my goal is to die without a probate estate and and have everything uh dealt out quickly and get it to the airs quickly, or not quickly if I put in the trust, like leak it out, but I want to be able to control that and not not a judge.

SPEAKER_02 10:00

Yeah, because I mean, you know, the will is important, obviously, but I was always taught, John, that a good way to remember is that if you have a will, you will go through probate. Right, it's an easy way to do it.

SPEAKER_01 10:09

Yeah, and and you use a trust when you don't trust, right? So you know, it if I if I have a life insurance policy, I I don't want to leave it to my 22-year-old and hit her with a a big bag of money.

SPEAKER_02 10:21

Yeah.

SPEAKER_01 10:21

Um, and who knows what you'll do at 22 uh millions of dollars in my pocket would not have been good. It would be it would have been more of a curse than a blessing.

SPEAKER_02 10:30

For most of us, yeah.

SPEAKER_01 10:31

So yeah, you wanna you wanna make sure that they're gonna it's gonna be a blessing to them.

SPEAKER_02 10:36

And when you're thinking about trust too, if you're talking with your clients about this, if you're trying to have that conversation, John, as a CFP, um, you know, I'm sure a lot of pushback, especially for older folks, is I'm not wealthy enough for that, right? There's always been this kind of stigma that you've got to be, you know, really wealthy to have a trust, and that's just not the case.

SPEAKER_01 10:54

No. I again, do you want do you here's your here's your choices? And the default is public, expensive, and delayed. Do you want that or do you want privacy? Do you want uh low cost, and do you want it quick to your kids? And hopefully that opens the conversation. I think is obvious.

SPEAKER_02 11:15

Yeah, and hopefully that opens the conversation to be able to say, okay, then that's why let's let's look at a trust, let's kind of start looking at some of these things, and then kind of maybe you've opened that door through that, you know, that through that setup there.

SPEAKER_01 11:26

Hidling is everything. Yeah. Hidling is everything.

SPEAKER_02 11:28

Okay.

SPEAKER_01 11:29

All right.

SPEAKER_02 11:29

Any final thoughts?

SPEAKER_01 11:31

And and I think that you know that that's a good segue of you know what happens when there's a death of one spouse. And there are certain things that you need to get in order. Obviously, after the funeral and the memorial service and and all of that, you know, there are things that the surviving spouse needs to do. And, you know, I have a checklist, you know, gather and collect the funds where the surviving spouse was the beneficiary. I'm gonna take a look at all of my the surviving spouse's IRAs, 401ks, annuities, life insurance policies, and I'm gonna change the beneficiary to my kids or to whoever's next, because most of the time my spouse is going to be the beneficiary. And if my spouse passes away, then it's like then it's a mess, right? Then I have to go through probate. And then again, cost, publicity, delay, you don't want that. So I for the surviving spouse, you need to change the beneficiaries. You gotta alert Social Security and Medicare. Stop paying the Medicare premiums for the deceased and stop collecting on Social Security. Now I can make a joke about that. That you know, Social Security were we're paying out people that were 120, 125 years old. What was that uh all about? Uh we had that in the in the uh in the media recently. Um life insurance policies again, changing the beneficiaries. But Mark, there are so much more uh that you need to do when a spouse passes away. I can't give all my secrets away for free.

SPEAKER_02 13:13

So well, he's gotta take some action for yourself as always. So whether you're an advisor and you're looking to get some more information or how to, you know, uh, you know, serve your clients better, or whether you're listening to this and you've like, hey, I need to get some of this stuff done myself, reach out to John at johnchoi.net. That's johnchoi.net. He's the certified financial planner and again an instructor for the CFP program. Uh, and he's the president at Epiphany Capital. And don't forget to subscribe to the podcast on Apple or Spotify or whatever app you enjoy using. Uh, the podcast has really been kind of picking up, so we appreciate all the listens and the support. So continue to uh, you know, share and uh and check new episodes out as they come out. We drop one of these uh just about every month. So John's always got some good nuggets of information for both sides of the coin, whether you're an advisor or you're a potential client. Either way, it's important to have a strategy in place, and that's why you should check out the show. It's Middle Class Millionaire with John Choi. John, my friend, thanks for hanging out, buddy.

SPEAKER_01 14:09

Always a pleasure.

SPEAKER_02 14:10

And we'll see you next time here on the program.

SPEAKER_00 14:17

Epiphany Capital is a registered investment advisor, RINA, located in the state of Illinois. Epiphany Capital provides investment advisory and related services for clients nationally. Epiphany Capital will maintain all applicable registration and licenses as required by various states in which Epiphany Capital conducts business as applicable. Epiphany Capital renders individualized responses to persons in a particular state only after complying with all regulatory requirements or pursuant to an applicable state exemption or exclusion.