Senior Spotlight: Risk Protections Against Cognitive Decline
Did you know that brokerage firms have automated systems and advisor checklists for detecting cognitive decline among aging clients?
Today we want to state upfront that we are talking about two very difficult things – cognitive decline and money. Sadly, there are no foolproof ways to prevent your loved one from experiencing some of the potential decreases in cognition with age, and no guarantee that he/she will not take some unnecessary risks or become victim to scams on account of it. Therefore, today’s blog is not a solution, but a perspective on the things that financial brokerages are doing to help detect if a client is experiencing cognitive decline and how this may impact their investment decisions.
Earlier this month, The Wall Street Journal published an article titled “Baby Boomers’ Biggest Financial Risk: Cognitive Decline” which outlined how lapses in judgement associated with cognitive decline can ravage retirees of hard-earned savings. Similarly. ThinkAdvisor reported just last week how financial literacy questions answered correctly decreased 10% per unit of decline in age related cognition.
These stats bring about two important considerations for aging loved ones. First, it is important to note that many brokerages (notably Vanguard Group, Fidelity Investments and Charles Schwab) have already (legally) implemented automated triggers that can help detect changes in mental capacity. Signals include difficulty navigating security protocols and frequent password resets. When such triggers occur, the systems can be set up to notify a previously designated family member.
Second, beyond the technology components of dementia-related detection is the humanity aspect. Financial advisors are going to need to provide increased support in symptom surveillance, looking for things such as unusual reliance on memory aids, missing appointments, repeating questions, changing patterns in judgment and changes in mood or personality. As ThinkAdvisor summarizes, “Ethically, advisors can’t serve as a client’s power of attorney — nor would [they] probably want to take that degree of control. However, [they] have a vested interest in protecting assets, assisting with wealth transfer between generations and ensuring that there is another person or system in place to oversee daily money matters if needed.”
The simple answer: a conversation. Industry recommendations include talking with clients about how to prepare in the event they could need financial caregiving support. The dialogue should be focused on:
· Asking clients for trusted points of contact and getting signed permission to reach out to those trusted contacts if you suspect the clients are experiencing diminished mental capacity.
· Helping clients decide which of their adult children or family members can be most trusted and capable of helping them with money matters as they age then encouraging them to name those people as their financial power of attorney.
· Encouraging clients to share details about their finances with their power of attorney so the POA doesn’t have to play detective if he or she has to step in and help with money matters.
Please note that this article is not intended to serve as legal or financial advice. We just want to ensure that as we all age, we are all thinking about the trusting the relationship we have with our advisor to make a plan that protects our best interests and allows us to choose who can support our financial needs with age before we need that support. Once cognitive decline begins, making such a decision comes with even greater ethical, legal and medical challenges.
Baby Boomers’ Biggest Financial Risk: Cognitive Decline
Bobbi Decker
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www.bobbidecker.com
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