Financial Caregiver: Individual or Company?
The fact that we are living longer in many cases increases the need to hire a personal caretaker to help us deal with the issues related to our declining health and functioning, but in many instances living longer also triggers the need to appoint a “financial caretaker.” A financial caregiver is a person whose job is to help you manage your money and other financial affairs when you are no longer able to do so independently.
The day-to-day activities of a financial caregiver would cover, among other things:
Help with your daily finances and the planning of your future financial needs.
Help you to identify your age-related benefits and plan how best to take advantage of these.
To be vigilant and protect you against the threat of potential financial exploitation.
Overall, we could sum up the role of the financial caretaker as someone who helps you manage your ongoing financial affairs and avoid preventable problems, such as missed payments and potential fraud.
A good choice for a financial caregiver should have the following characteristics and profile:
•Someone you trust implicitly
•Someone with the knowledge and the right mindset to do things right
•Someone who can interact effectively with your family members and other financial professionals
•Someone who is younger than you and therefore likely to stay with you long-term and act on your behalf for the duration of your lifetime.
There are no best practices on how best to choose a financial caregiver but we believe the following could serve as a guide in that respect.
Evaluate the advice—financial and otherwise—this person has given to you or others in the past. The only way to judge how people will act in the future is by evaluating how they’ve acted in the past.
Of course, past behavior holds no guarantee on future behavior but it’s the most reliable indicator. Evaluate the way they have managed their own finances. The result of how careful they were while managing their own finances could give an indication of how they will manage yours.
Choosing and appointing your financial caregiver is the first step in start of a long-term relationship. Notwithstanding, when choosing your financial caregiver, the best approach is always to move ahead cautiously. By doing this you will retain the flexibility to switch and appoint another advisor in case you are not happy with the way the relationship is developing. You will want to arrange things to move slowly and be confident in your choice of financial caregiver before entrusting any major decision-making authority to the financial caregiver. You should remain in control and advance the relationship at a pace with which you are comfortable. Remain vigilant and take action if you get the feeling the financial caregiver is pushing too hard to move in a particular direction or becomes vaguely threatening about what has to be done.
There is no specific guidance on how to start the relationship with a potential financial caregiver. One way would be to entrust him or her with some minor tasks and evaluate the execution and results. For example, start by entrusting the potential financial caregiver with tasks such as the review of bank statements or filing your tax return.
It’s sad but the truth of the matter is that even a carefully selected financial caregivers can turn out be an unscrupulous individual. There are conditions that affect them over which you have no control—a dramatic change in their own financial circumstances could lead them into bad judgment and behavior. For example, if he or she were desperate for money, a financial caregiver with control over your bank account could transfer funds to his or her own bank account to settle their personal expenses. It could happen, and worse yet, you may not become aware of their wrong doing until it is too late, after the damage has already been done. Or it could not be disclosed until after your death when the beneficiaries of your inheritance discover the fraud.
Be assertive and never hesitate to end the relationship if you’re uneasy about what’s happening. And never blame yourself or be ashamed to admit and report if there is a problem; not taking action will only make the situation worse.
One major consideration in deciding to have a financial caregiver is individual versus company—to entrust your finances to an individual who you believe will serve in your interests or to become a client of a financial services company. In making that decision, a choice for a trust company has the advantage of being more objective and detached emotionally from your circumstances, more so than a relative or friend might be in the same circumstances. A trust company has a track record of performance that is available to you. For example, any complaints to a better business bureau or governmental department are available to you for review.
A trust company will always be “younger” than you, that is, even with the unexpected death of the individual within the company that is providing you service, you remain a client of the company and will continue to be served. And because a company has multiple connections to other financial agents, there is a system of internal and external checks and balances. The fiduciary nature of the relationship between a trust company and its clients lowers the risks as described above; a trust company is compelled by laws and regulations to practice full disclosure and transparency, and to act in its clients’ best interests. Compared to an individual, a trust company has more to lose by acting inappropriately; being caught mishandling the finances of one client results in the loss of many clients.