A decision this week by the California Appellate Court to overturn the conviction of Glenn Neasham for theft from an elder in connection with the sale of an annuity is a welcome result for the insurance and the financial services industry. However, the case still holds important lessons for professionals when they work with elderly clients.
That was one of the upshots from a webinar held today sponsored by the Society of Financial Service Professionals (FSP) that recapped the case from its beginning in 2008 to the reversal that came down on Tuesday. FSP filed an Amicus Brief (“friend of the court”) in conjunction with the appeal process.
Richard M. Weber, CLU, AEP, immediate past president of FSP, said the case highlights the issue of whether insurance agents and other financial professionals should be responsible for judging the mental competence of a senior client. He noted that although 30 states have passed the NAIC’s Suitability in Annuity Transactions Model Regulation, the act does not specifically address the assessment of cognitive fitness.
Therefore, he recommended four measures, all with pros and cons, advisors can take to evaluate mental competence and document their dealings with a senior client:
- Ask questions. This list would include such queries as: “What is your full name?” “What is today’s date?” and “Who is the current president of the United States?” However, the one drawback to this method is establishing how many questions a senior client would have to get correct in order to feel secure he or she is mentally competent, Weber added.
- Have a friend or family member attend client meetings. Having a family member or friend sit in on client meetings was advocated. Yet Weber conceded many seniors may be uncomfortable having another person privy to their financial status.
- Ask the client to explain the product back to you. The one caveat to this approach is that complex products like annuities may be difficult for many consumers to describe in detail, Weber cautioned.
- Record meetings. This should be done with the permission of the client and the client should get a copy of the recording, Weber stressed. Such recordings would be admissible as evidence in a court proceeding, he added. Careful note-taking and retention of those notes was also recommended.
In regards to the Neasham case, Weber pointed out that the state and the county have a window of between 30 to 40 days to decide whether to appeal the Appellate Court decision. Yet, he said he believes it is unlikely there would be a retrial.