Family says man with dementia lost his $50 million fortune in risky investments — now they're suing JPMorgan to recoup his wealth. Here's what baby boomers can learn from this case

The family of a once-wealthy businessman is fighting JPMorgan Chase & Co. in court after watching his multimillion-dollar fortune fade away in risky investments.

From age 78 to his mid-80s, Peter Doelger and his wife Yoon say his wealth shrunk from approximately $50 million to just $1.5 million under the watchful eye of JPMorgan, according to Bloomberg.

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While the bank claims it was acting on Peter’s wishes to take investment risks — which actually paid off for several years prior to the portfolio’s rapid decline — the family argues Peter did not understand the risks he was taking.

Peter’s family and doctors say he was showing signs of cognitive decline and dementia during the period in which his wealth tanked. The family has accused JPMorgan of keeping Peter in risky investments and loaning him money to secure high management fees and interest.

In a counterclaim, JPMorgan — which says it has policies and procedures in place to protect elderly and vulnerable clients — says it was never made aware of Peter’s cognitive decline, and that Peter signed a letter in 2015 attesting to his sophistication and interest in making such risky investments.

The case is now playing out in a Boston federal court. The Doelgers are seeking to recoup tens of millions of dollars and JPMorgan says it will “vigorously” contest the claims.

The risk of MLPs

Peter’s fortune slipped away in Master Limited Partnerships (MLPs), exchange-traded investments that typically hold cash-generating assets such as oil and gas properties or pipelines.

A big risk of an MLP is the concentrated exposure to one industry or segment. Because many MLPs are currently in the energy sector — particularly in the pipeline or energy storage industries — they can be acutely sensitive to shifts in oil and gas prices. JPMorgan claims it warned Peter of this risk and urged him to diversify his portfolio, but he was not persuaded.

From 2009 through 2014, Peter’s bets on MLPs outperformed the S&P 500. He amassed tens of millions of dollars and sought to continue that strategy, according to JPMorgan’s court documents, per Bloomberg.

But there was an unprecedented dip in oil prices in 2015 and 2016 — due, in part, to oversupply and weak global demand — and his extensive portfolio plunged 19% by the end of 2015 to about $30 million. In the following years, the portfolio experienced several dips and troughs in line with energy market volatility, but its value gradually declined to just $20 million by the end of 2019.

Then came the COVID-19 pandemic hit and oil prices took an immediate nose dive. At this point, Yoon had become a co-owner of her husband’s account. The Doelgers’ MLP investments lost 24% in a single day on March 9, 2020, and within days they had sold all their remaining assets to pay off their extensive bank loans, worth almost $10 million.

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Cognitive decline

The Doelgers’ case “screams out for more attention to how waning cognitive abilities affect older people’s capacity for financial decision-making and independent financial management,” Naomi Karp, a former analyst for the Consumer Financial Protection Bureau, told Bloomberg.

Baby boomers own around $78 trillion in assets, according to the Federal Reserve, which is nearly half of all wealth in the U.S. Many Americans in this older age bracket have enough in assets to be considered “accredited” investors under U.S. Securities and Exchange Commission (SEC) regulations.

A 2019 working paper found strong evidence that older U.S. households are “at risk of meeting the accredited investor definition without having the sophistication needed to avoid high agency costs in a largely unregulated securities market.”

It also found: “Accredited households aged 80 and older are more than 80% less likely than unaccredited investors aged 60-64 to have high financial literacy scores. This reduced financial capability in later life appears to mirror the rate of decline in measures of cognition.”

Yoon told Bloomberg she “never understood” MLPs or the bank’s investment advice.

“I feel like we were both dumb and dumber,” she said, recounting how Peter was also in the dark.

That was reiterated by James Serritella, Yoon’s son-in-law and the lawyer representing the couple, who told Bloomberg: “I don’t believe Peter understood this stuff the way they made him out to understand it. Peter trusted people: ‘I don’t need to know all the ins-and-outs because I trust you.’ So this whole construct of the sophisticated guy, we strongly disagree with that.”

Lessons for aging investors

Whatever happens with this case, there are lessons to be learned for aging investors.

Over time, as you progress toward retirement, financial advisers typically suggest adjusting the blend of investments in your portfolio to be more conservative.

The idea is to diversify your portfolio with safe investment options — such as bonds, high-yield savings accounts, certificates of deposit (CDs), Treasury bills, money market accounts and fixed annuities — instead of just relying on Social Security or your retirement savings.

If you were a keen investor during your working life, this doesn’t mean you have to stop engaging with the stock market — but you may want to adjust your strategy away from riskier bets toward well-established dividend-paying stocks.

The aim is to ensure you have a stable income throughout your golden years and that you’re not at risk of losing it all, such as the Doelgers, who claim they had to sell their condo and move in with relatives.

If you are an experienced and accredited investor, you may still see opportunities in MLPs, including their tax advantages and their potential for super-high yields. If you’re considering an MLP, the SEC advises you to speak with an investment professional to help you understand the MLP’s prospectus and financial statements. These filings are publicly available and include information about the MLP’s business strategy, forecasts of future distributions and risks.

It is not wise to jump head first into an MLP investment — or any investment opportunity — without fully understanding your financial exposure.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.