Elder Abuse: What You Need to Know & Be On the Alert for

thunder0Over the weekend, my younger son and I watched a fun animated movie called Thunder & the House of Magic. Part of the plot of the movie: a nice, old, wacky magician, who has some “cognitive decline,” is in jeopardy of losing his home.  Why: the magician’s scheming nephew sees his chance to cash in by selling his uncle’s mansion, tricking the old man into signing what turns out to be a power of attorney.  What happens: Thunder the cat saves the day.

It wasn’t the greatest movie and hasn’t won any awards, but it was entertaining for us. Moreover, it touched upon a growing epidemic in the US: elder abuse.

Elder abuse is an intentional act, or failure to act, by a person in a position of trust, that creates a risk of harm to an aging adult. It can be physical and/or emotional. From a financial perspective, exploitation occurs when there is unauthorized, illegal, or improper use of an aging adult’s resources by a person in a position of trust. According to the National Adult Protective Services Resource Center, 90% of elder abusers are family members (like the movie) and less than 5% of cases get reported to any agency.

Elder abuse is prevalent because of “diminished capacity” in our senior population. Diminished capacity is a mental condition that affects a person’s ability to understand their own decisions or acts. One of the most common example of diminished capacity in aging adults is dementia. Dementia describes a set of symptoms that may include confusion, memory loss, emotional disturbances (e.g. anxiety, paranoia, depression) and difficulties with thinking, problem solving, and/or language. Alzheimer’s is the most common form of dementia and impacts 1 in 9 Americans over age 65. It’s diagnosed among 20% of Americans over age 70 and 33% over age 85. It’s a slow, progressive, irreversible disease with, so far, no cure.

Unfortunately, there are bad, greedy people that take advantage of these seniors, and like the nephew from our cat movie, are on the attack for what they think is an easy pay-day. Sometimes it’s a “new friend” that spends a lot of time developing the relationship and justify in their heads that their behavior is okay because of their time spent paying attention to the aging adult. Unfortunately, in all cases, potential elder abuse is something we need to monitor.

Here are the common signs of elder abuse:

  • Neglect
  • Physical or emotional abuse
  • Blocked access to assets or belongings (e.g. the wacky magician was stuck in the hospital not knowing that the nephew was showing the house to would-be buyers)
  • The aging adult’s regular habits change.
  • A previously uninvolved relative, caregiver, or “new friend” makes decisions on the aging adult’s behalf.
  • The aging adult becomes isolated from professional advisors and even family.
  • Unexplained disappearance of valuable objects, financial statements, cash
  • Unexplained or unauthorized changes to wills or other estate planning documents
  • The aging adult exhibits strange behaviors, such as:
    • Unpaid bills and changes in spending habits
    • Unexplained change in professional advisors (e.g. doctor, CPA, attorney, etc)
    • Unexplained asset transfers
    • Atypical cash withdrawals/wire transfers
    • Checks written to “Cash”

DWM looks at every client transaction and will flag anything that looks out of the ordinary. As such, wealth managers can often serve as the first line of defense for addressing some aging client issues. But that doesn’t mean loved ones shouldn’t be on alert. If you suspect an incident of elder abuse, contact your local Adult Protective Services who will investigate. Here’s the link: http://www.napsa-now.org/get-help/help-in-your-area/

Given the increased focus to elder financial abuse prevention, regulators are adding enhanced scrutiny in this area, and laws and regulatory monitoring are progressing. The SEC came out with a recent Bulletin encouraging investors to plan for possible diminished financial capacity, stressing the importance of such planning tools as:

  • organizing important documents
  • providing financial professionals with trusted emergency contacts
  • creating a durable financial power of attorney

Our clients know that as part of our estate planning review, DWM requests and monitors these three important tools.

The good news is that people are living longer. The bad news is that some of the older population, particularly the ones with serious cognitive decline, are vulnerable to this elder abuse phenomenon. Be sure to keep your eyes and ears open to prevent this from happening. Stay in touch with your elder loved ones and look for the common signs. And if you do see the signs, take action immediately…just like Thunder the cat…so like the movie there is a happy ending!

Budgeting Made Easy

BudgetingI recently researched and tested 3 different personal budget applications: HomeBudget, YNAB, and Expensify.  The goal was to find an app that clients and I personally could use for budgeting. Budgeting is much different than saving.  Saving is income not spent, or deferred consumption, e.g. money set aside to grow and eventually spend during retirement. On the other hand, budgeting is managing expenses to fit a given income. Each application has their advantages and disadvantages but they are all great when it comes to keeping monthly finances in order.

YNAB:

YNAB, or “You Need a Budget” is the first app I reviewed. For starters, YNAB links to a checking account, which is a plus because income does not need to be updated manually, it is done in real time. After monthly income has been set, every dollar of the previous month’s income is assigned to a specific category within the app. Categories are: Immediate Obligations, True Expenses, Debt Payments, Quality of Life Goals, and Just for Fun.  This app is different in the idea its goal is to use the previous month’s income to pay for the following months expenses, rather than most budgeting applications that use any funds available to pay off expenses. This app also stresses the importance for having cash on hand for emergencies or unusual expenses. Rather than only paying off the expenses you planned on having, YNAB makes sure a predetermined amount of cash is set aside for a rainy day. A fallback to YNAB is it is not the simplest app to navigate through and takes some time to get used to. It takes about 2 weeks to get totally comfortable, which is most likely the reason for the 34-day free trial. After 34 days, the cost is $5/month or $50/year.

Expensify:

What first caught my eye about Expensify was the price. It is free. Expensify links to individual credit and debit cards to keep track of expenses so you do not need to enter them manually. This way you will be able to keep track of expenses without having to hang on to every receipt. At any time you can export expense reports or send invoices directly off of the mobile app. Expensify can also keep track of things like “Distance” for people who need to expense travel costs and “Time” for people who are paid on hourly wages. A fallback, however, is Expensify is not a true budgeting tool. So, while you will have a better idea and an easier time keeping track of expenses, you cannot pre-set a budget for individual categories.

HomeBudget:

This is my favorite application from what I tested. It is very simple to read, colorful, and easy to navigate. When first entering the app, five sections appear: Expenses, Income, Budget, Accounts, and Bills; along with the dollar amounts of each (once you enter them). Below the sections, you see a gauge showing how much of your monthly budget you have spent and a month by month trend for expenses. It is like a condensed expense report summary right on the home screen. This app is very flexible and allows you to enter income in a variety of ways. Within the income tab, you select the add button and an “add income” tab pops. Whether you have a steady paycheck and title each check as “bi-weekly paycheck,” or you are a free-lancer and title it as “John Smith” because a client made a payment, you will be able to utilize a detailed description of income and what account it is going to. The same detail is available within the Expense section of the home screen. There are seven categories (Utilities, Food/Grocery, Departmental, Entertainment, Car/Auto, Insurance/Medical, and Misc/One-Time) all with subcategories. This allows you to keep a detailed record of all expenses.  Within the budgeting section, you can either take a broad approach, or an extremely detailed one. A broad approach would be selecting the “One-Budget” option within the Budget section of the home screen. This is for anyone who doesn’t mind where they spend a monthly budget, so long as they stay under the predetermined amount. Other people, who prefer to be more detailed, can go in and set individual budgets for each category or even sub-category. With this approach, you can see how much of a category budget has been spent for the month and if you click on a category, you can see how much has been spent on each sub-category. HomeBudget is by far the most hands on, detailed and efficient application I reviewed. However, there are a few drawbacks, the application costs $4.99 on iPhone/$5.99 on Android and does not connect to a card or bank account to easily keep track of expenses.

In my opinion, the HomeBudget app in conjunction with your banking app that keeps track of expenses is the best solution. Personally, I utilize my bank’s mobile app for tracking all the expenses against my checking account. If you don’t have something like this for your checking account, you may consider downloading something like Expensify and linking your credit/debit card. This way it will be much easier to enter expenses into a budgeting application like HomeBudget.

We can change how we think of budgeting.  In the end, it is not about spending as little as possible.  It is about having a plan for wisely spending what we have to meet all of our goals.  These applications are a great tool to help us make sure we don’t overspend and, more importantly, to make sure we continue to enjoy living the life we want to live.

*Other budgeting applications with good reputations I did not get a chance to review: Mint.com, GoodBudget, Mvelopes, Simply Planning, BillGuard, and Pocket Expense

Impact of Hosting the Olympics

2016-08-01-1470024501-2875993-RioOlympicsThe past several months have been extremely disheartening due to the countless acts of violence and terror that has wreaked havoc across the entire world. An event like the 31st Olympiad, in Rio de Janeiro, brings hopefulness to the world as we set aside our political, religious and other differing beliefs to come together and stand behind the athletes that represent our countries. With all the optimism that surrounds the Olympics, it’s surprising to think that only a few cities offer final bids to host the games each election period. For these 2016 Games, Rio, Chicago, Madrid and Tokyo were the only cities that offered final bids. With the extensive media coverage, publicity and millions of tourist that travel to the Games, it begs the question as to why more cities are not clamoring to host the Olympics?

There is no doubt that the Olympic Games brings national pride to citizens of the host city. However, the underlying fact is that hosting the Olympic Games is an extremely risky megaproject that most cities want to avoid. Since the first modern Olympics held in Athens back in 1896, the cost for hosting the Games has increased exponentially. In today’s dollars, the post-war 1948 London Olympics cost $30 million. From there, the budgets continued to grow until the 1976 Games when Montreal spent $1.5 billion that took 30 years to pay off and almost bankrupted the city. Fast forward to Rio, and the Olympics are expected to cost roughly $12 billion, but could end up costing as much as $20 billion.

Not only are the actual costs of the event astonishing, but the maintenance costs for these Olympic venues after the Games have ended are a burden on the host city. Most of these venues are built specifically for the Olympics. Once the Games have finished, the city has to find ways to utilize these venues to help offset the cost. For example, the Bird’s Nest stadium built for the Beijing Games cost the city $480 million dollars to build. The city is currently looking for a regular tenant, but while it searches, the city has to front the $11 million annual maintenance costs.

The host city does generate revenue from the Games which helps offset some of the costs. Cities receive a portion of the media rights and sponsorship income generated by the International Olympic Committee (IOC). In addition, cities will generate revenue from local sponsorships and ticket sales. An economist from Smith College in Massachusetts estimates that the Olympic Games will generate about $4-5 billion in revenue from these four sources. The remaining funds have to be generated from local and national governments. Any overrun in budget falls on the host city. Since 1960, the average budget overrun is a staggering 179%.

The cities that submit proposals to the IOC understand the risks that are associated with hosting the Olympics. Essentially, they are writing a blank check to fund the infrastructure and security demanded by the IOC. Just because a city hosts the Olympics, doesn’t mean the city will always incur years’ worth of debt. Although past statistics are not favorable, studies show that some hosts experience a positive effect on their economy. The 1992 Barcelona Games may be the most successful in the last several decades. Although Barcelona blew their budget by 400%, the long-term benefits have far exceeded expectations.

When Rio was awarded the Olympics nearly 8 years ago, the country’s economy was thriving. Since then, the country has experienced political turmoil and a suffering economy. The infrastructure and security improvements described in Brazil’s proposal to the IOC were delayed due to the country’s widespread instability. Like Barcelona, Brazil hopes that the newly completed infrastructure and increased publicity will help boost their economy by attracting future tourist and global and local businesses. Once the games have finished, it will be essential for Rio to utilize the infrastructure to help offset the long-term costs.

As great as the Olympic Games are to watch and experience, it’s amazing that the IOC puts this type of pressure on the host city. Unfortunately, there is no indication that the program will change. For the time being, we applaud those cities that volunteer to host this great event. Even with the negativity that has surrounded Rio the last several months, the 2016 Rio Games have been a great success and we hope that these Games will bring a boost to the Brazilian economy and well-being.

Save the Fan: Reviewing Property and Casualty Insurance

ceiling_fan_cleaningThere is a salty saying by an author perhaps intentionally unknown which is, “A little risk management saves a lot of fan cleaning.”  Our lives today demand that we all have varying amounts and styles of insurance.  We all know we need it, we just don’t necessarily know how much or what kind.  And if a catastrophe or accident occurs, the last thing we want to discover is that we are not covered as well as we thought, or worse, that we aren’t covered at all.  Properly insuring yourself, your family and your personal assets from a variety of risks is a necessary consideration nowadays and it can be confusing to decipher the particulars.  At DWM, we believe regularly evaluating your risk management is a fundamental element in your total financial picture.  As our clients know, we include a regular review as part of our on-going total wealth management process.

It is always important to do a routine annual assessment. Certain life events may trigger a need for policy updates.  My daughter recently got her driver’s license, now my third household driver under 20, so I am particularly aware of how a new driver or change of automobile status can trigger a painful review of auto insurance costs!  With homeowner’s insurance, everyone understands that when you move you will need to investigate property insurance.  It is also a good idea to watch for the renewal notices and review each policy before it is due to renew.  It can be easy to forget about property insurance when it is buried in an escrow payment, so you can check with your mortgage lender or insurance agent to keep track of the renewal date.  There are other events that should make you think about your insurance as well.   Perhaps you added some significant jewelry or art that may need to be covered.  Maybe you did some renovations or improvements to your home recently, like an added security feature, a new roof or upgraded windows.  Other triggers might be changes in lifestyle – marriage, birth, divorce or death can all affect your insurance requirements.  Even sending kids off to college or landing a new job with added responsibility can increase your need for coverage.  All of these changes can impact your property and casualty insurance policies and should be evaluated by an insurance professional.

Besides changes in your lifestyle, it is worth reviewing your policy to look for coverage problems.  Some coastal homeowners’ policies may have very high deductibles for wind & hail insurance.  This includes hurricane damage, but also can include a thunderstorm knocking a tree onto your house.  You might prefer to have a high deductible on the “named storm” coverage and keep the regular wind events covered in the lower amount of your “all other perils” deductible.  Most homeowner insurance coverage uses a standard cost for satisfying replacement or repair claims.  You may want to look for policies with extended replacement cost coverage for custom home features or for inflated costs of goods and services during a large impact event.  Lastly, it is a good idea to be sure you aren’t over-insured.

We also think it is important to watch for changes in the marketplace and keep up with new products or services that might be available to our clients.  We have recently learned more about a company called PURE (Privilege Underwriters Reciprocal Exchange), a mutual company owned by its ‘members’ or policyholders rather than public shareholders.  Their niche model specializes in offering exceptional coverage and savings to “responsible” owners of the “finest built homes” and allows PURE to offer competitive rates for property & casualty insurance, often with premiums at 20% less than their competition.  The idea is to provide competitive coverage to successful families who are motivated to take care of their properties and who value the premium customer service offered to the PURE members.  The PURE founders came from the high net-worth programs at AIG and Chubb and have been inspired, in part, by the successful member exchange concept at USAA.  PURE believes in a client-centric service model with financial transparency and customized and detailed risk management assessment.  PURE writes insurance around the country for high-value properties worth $1 Million or more.  We don’t endorse particular companies, but we think PURE does a good job of acting as a fiduciary for the insurance coverage of their clients.  If you fit their profile, it is worth getting a quote from an agent.

Sorting through all of the coverage levels, intricate policy choices and evaluating your personal insurance requirements can be daunting and time-consuming.  At DWM, we are happy to sort through the details on all of your insurance, including property & casualty, health, life, disability or long term care.  We work with trusted insurance professionals to ensure you have the most appropriate coverage at the best possible price.   We think it is important for all of us to work together to make sure your risk is well-managed.  We hate to see our clients have any fans to clean!