During two decades covering personal finance, I've learned a great deal from savvy retirees who manage their own money. They've clued me in on everything from arcane strategies to maximize a couple's Social Security take to a great opportunity (alas, long since past) to buy I-Bonds paying 3.6% above inflation. (Hat tip to savings bond guru Mel Lindauer, one of the founders of the Bogleheads.org group.)
But here's the uncomfortable truth. As folks become "old old" a good number find staying on top of all their bank and investment accounts difficult; forget to pay bills (or pay them twice); and even fall for too-good-to-be-true offers they would have scoffed at earlier. (What's old, old? It might be 75 or 85, depending on your personal life expectancy. With early onset Alzheimer's and frontotemporal degeneration, however, money management issues could arise at much younger ages.)
"Financial ability starts to slip before anything else,'' says Carolyn Rosenblatt, a nurse, lawyer and Forbes contributor on aging who, with her clinical psychologist husband, Mikol Davis, has started a web site to educate financial pros on this growing problem. She points to research by University of Alabama Professor of Neurology Daniel C. Marson and others finding impairments of "financial capacity" in patients with only minor cognitive losses.
So I was pleasantly surprised, while helping to report the current Forbes Magazine cover story on how Millennials will change money management, to come upon two new web based services that could help some elders with money management. No, these services weren't designed explicitly for this purpose. But they demonstrate how technology can help the aged maintain their independence on the financial front, just as new tech gadgets such as cellular enabled pill bottles that remind you when to take your medicine can help older folks live independently.
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The first new service is offered by The Vanguard Group, that bastion of do-it-yourselfer-ism and low-cost index fund investing. For 0.3% of assets a year, Vanguard Personal Advisor Services will both manage your investments (allocating your portfolio, rebalancing your holdings and managing distributions, including required minimum distributions from IRAs) and give you access (via phone, email and video chat) to human financial planners. A Vanguard lawyer will even review a client's estate plan and tell him if it needs updating, but you'll have to hire your own lawyer to draw up the documents. The service is only in a test phase, with a formal launch expected next year, says Karin Risi, Vanguard principal in charge of retail advice services. But if you keep $100,000 or more at Vanguard, you can sign up for it now.
That 0.3% of assets is less than half the 0.7% Vanguard has been charging for the money management service it has offered for nearly 20 years, and less than a fourth of the 1.32% of assets average financial advisers charge, according to Vanguard. No, Vanguard's advisors won't buy you lunch at the country club. And if you have less than $500,000 under management, you'll call an 800 number to reach a team of advisors, instead of having one planner assigned to you personally.
Even during its unadvertised test phase, Vanguard is seeing more demand than it anticipated. In fact, it's finding that some long-time do-it-yourself clients want money management help, particularly when wealth is being passed to children or spouses, says Risi.
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