When clients show signs of dementia, what should financial advisers do?

By Morey Stettner

Take steps now to avoid a financial mess later

Relationships between a client and their financial adviser can sometimes get awkward. Money stirs our emotions, potentially leading otherwise calm, composed clients to cry, lie or even yell at their adviser.

Perhaps the toughest challenge occurs when clients show early signs of dementia. They may behave in uncharacteristic ways – repeating themselves, lashing out suddenly or struggling to recall recent events. Experienced advisers know what to do and where to turn when that happens.

“I had a half-hour conversation with a client, and the next day, they called me about the same thing,” said Faron Daugs, a certified financial planner in Libertyville, Ill. “Our role is to be as empathetic and patient as we can be,” he said, while reassuring them about their concerns.

Like many advisers, Daugs encourages clients to designate a “trusted contact” – and to do so before they experience a health issue. Having one or more such contacts on file enables a financial planner to share information that helps administer and safeguard the account.

Without a trusted contact, confidentiality rules may prevent advisers from disclosing certain information to a client’s family. If dementia advances, the adviser is left with limited options in enlisting loved ones to protect the client from scams or from making misguided money decisions.

Daugs documents his file when a client makes repeated calls to discuss the same matter or exhibits other worrisome signs. If such incidents occur regularly, he will alert the trusted contact.

“I’ll make them aware that the client may be slipping a little bit,” he said. “It’s important to get ahead of it early and make it more of a team effort.”

The best advisers not only possess technical knowledge but also display high emotional intelligence. They build trust with clients while getting to know their family and support network. Frequent contact with clients over time cements that trust. But if an adviser rarely initiates contact, that’s a red flag.

“Often, an adviser isn’t in touch enough with what’s going on in the client’s life,” said Christine Moriarty, a certified financial planner in Bristol, Vt. If they only interact with a client occasionally – maybe once a year – they may not spot cognitive decline until it’s too late.

“You can only help a client as much as they want to be helped,” said Moriarty, a speaker and writer on financial topics. Many people with early stage dementia may be in denial, and unwilling to take proactive steps to secure their financial future.

Ideally, advisers take such reluctance in stride and continue to chat with clients every three to six months. Whether it’s a casual check-in call or a formal meeting to review their financial plan, these conversations enable advisers to detect subtle shifts in a client’s cognition or mood.

Armed with this information, advisers might suggest fintech tools to help clients and their loved ones manage household finances, pay bills and control expenses.

Read: Retirees are embracing technology – how to find the best tools for finance, estate planning and more

Advisers should also kick a client’s estate planning into high gear. This is especially important for high-net-worth clients with more sophisticated needs, although everyone should take care of the basics – powers of attorney, living will, advance directives.

“It’s making sure every loose end is buttoned up for the client,” said Taylor Custis, trust counsel at Fiduciary Trust International. “That means making sure assets are titled in a way that matches the client’s estate plan” and setting up trusts, such as a generation-skipping trust, to avoid taxes and honor the client’s wishes.

Custis, an Atlanta-based wealth manager and attorney, highlights the need to “put in place extra controls” on a client’s household finances when they show signs of dementia. Examples include canceling unnecessary credit cards and setting limits on the remaining cards so that a cardholder can’t spend more than, say, $700 or $1,000 a month.

Read: Why no more than 60% of your retirement money belongs in stocks

“You can also request extra verification steps if a charge is above a certain amount,” she said. “And you can place limits on the amount of money transfers you can do” before having to complete additional authentication steps.

An individual’s rate of cognitive decline is unpredictable, so an attentive adviser should spring into action in a thoughtful, supportive manner. Waiting can prove costly.

“The first thing is to show compassion, empathy and understanding,” Custis said. From there, involving a client’s trusted contact and family members helps everyone band together to work in the client’s best interests.

Read: ‘I handle my dad’s finances’: My father is in a nursing home and will get $100K in compensation. What should I do with it?

-Morey Stettner

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

  (END) Dow Jones Newswires

  11-14-24 1334ET
Copyright (c) 2024 Dow Jones & Company, Inc.