A U.S. District Court in Philadelphia last week sentenced Michael Donnelly of Lecanto, Fla.-based Coastal Investment Advisors to eight years in prison for funneling approximately $2 million from several elderly clients. The former president of the firm used the money to finance his children’s private school tuition and other luxuries. He fabricated account statements of his victims as a way to cover up his wrongdoing.
The news comes as state financial regulators are looking more closely at how wealth managers interact with the elderly.
Yet despite the unsettling news of an outlying advisor skimming from his elderly clients' accounts, the vast majority of advisors continue to pay close attention to the warning signs of financial elder abuse.
The combination of a legal and financial career has fine-tuned Ronald Fatoullah’s listening skills. His dual career has shaped him to become extra intuitive to clients who are at risk of financial elder abuse.
For nearly 40 years Fatoullah has practiced estate planning and elder law at his Great Neck, N.Y.-based firm Ronald Fatoullah & Associates. In 2011, Fatoullah branched into the wealth management industry when he partnered with his son, Josh Fatoullah, and launched J.R. Wealth Advisors. The firm is also headquartered in Great Neck and manages less than $100 million as part of LPL Financial’s network.
Fatoullah ventured into wealth management after his legal clients wanted to continue to consult with him on financial matters.
“I’ve always been very involved with my client’s finances,” he says. “It’s been very liberating for me to be able to do this.”
From the start of his elder law career, Fatoullah says financial abuse was something that he always looked out for: “You learn to see the signs. Some of them are subtle and some aren’t.”
The warning signs usually crop up when an aging client begins losing mental capacity or shows signs of dementia. As an advocate for people with Alzheimer’s, Fatoullah says he is fully aware of the disease’s symptoms – and when a client’s mental capabilities start to decline.
“The client can still have capacity to sign a will and write checks,” says Fatoullah. But before there is complete loss of capacity, in the interim clients can start to show signs that they are becoming mentally frail. “This is when someone can take advantage of them. In law, we call this undue influence of the individual.”
One situation of undue influence Fatoullah has seen time and time again involves adult children. The child living closest to the ailing parent is often the one responsible for the parent’s healthcare needs. At times the child may become resentful toward his or her siblings, feeling they aren’t pitching in enough, or at all. And this is when Fatoullah says the manipulation can start.
The signs can often seem quite innocuous at first: Increased calls from the client inquiring about the details of their own assets; requests to suddenly move funds around. In his capacity as an attorney, Fatoullah says he might also field instructions that assets in the will be split differently to what was initially agreed before the client’s mental or physical capacity started to change.
When this happens, Fatoullah says he sometimes suggests to his client that they can make provisions for the progeny who is assisting them with their daily care. For instance, the client could pay a salary to their adult son or daughter, or give them gifts for helping out.
But when a client’s mental capacity has declined to the point where they need guardianship, Fatoullah says the situation is monitored more closely. For example, if there are signs of mental manipulation or abuse – physical, mental or financial – adult protective services is sometimes called in.
Oftentimes Fatoullah has seen situations where it’s not the offspring who are manipulating the elderly, but instead individuals who have no direct family ties to his clients, such as a caretaker or service provider. More than once he’s received calls from his clients saying that they would like to leave their house to their hairdresser.
He recalls one particularly unsettling call he received from a client, who wanted to change the name of a beneficiary to someone who was not related to the client.
“It sounded like the client was reading from a script,” Fatoullah recalls, which made him suspect that a third party was perhaps persuading his client to make the change.
Another signal Fatoullah pays attention to is people’s signatures, which tend to change over time. Among aging clients, signatures may vary for a number of reasons, including dementia, a stroke or arthritis.
“If the signature doesn’t look right, then ask,” says Fatoullah, suggesting that a signature change may signal an alteration in the client’s circumstances and that the advisor should pay more attention to requests that seem out of the ordinary.
One of the most important lessons Fatoullah learned about elder financial abuse is that it can happen to anyone: “A child can turn on a parent at any time. A caregiver or a stranger can take advantage at any given time.”
It’s not easy for an advisor to tell a client that a loved one is trying to manipulate them out of their money. Because every scenario is different, many times ill intentions are not always going to be clear. Turning the suspicion over to his compliance team for extra deliberation is an automatic reaction for him.
“At least I know my clients will be taken care of,” he says.