Alzheimer's scourge challenges advisers

If a client's behavior shifts, what do you do?

Jul 28, 2008 @ 12:01 am

By Darla Mercado

When an elderly client called to request cancellation of a long-term-care policy, Cynthia R. Haddad knew something was wrong.

"I didn't want her to cancel the policy," said Ms. Haddad, an adviser with Bay Financial Associates LLC in Waltham, Mass.

The request prompted the adviser to call one of the client's children. In turn, the client went to the doctor and was given a diagnosis of early-onset Alzheimer's.

The situation left a lasting impression on Ms. Haddad, who said she has had other older clients behave irrationally.

"They call up repeating the same questions — things you thought they understood earlier — or they want to change beneficiary designations because they're angry at a child," she said.

Alzheimer's disease and other forms of dementia have become a new challenge for financial advisers as clients live longer and especially as baby boomers age.

Some 5.2 million Americans have Alzheimer's, according to the Alzheimer's Association in Chicago. That number is predicted to rise to as high as 16 million by 2050.

There is no playbook that tells advisers how to deal with clients in mental decline. The fact that Alzheimer's and dementia are progressive conditions and that some people can hide their symptoms makes it difficult for advisers to judge whether a client is capable of understanding estate plans and financial products.

"A major point to keep in mind is that some people with Alzheimer's may still be capable of making financial and other planning decisions for themselves," said Katie Maslow, associate director for quality-care advocacy at the Alzheimer's Association.


"Some people in the early stages of the disease may be able to understand the implications of a particular financial decision well enough to make a competent choice. Others may not," Ms. Maslow said.

The ability to handle finances tends to decline in patients who have even mild Alzheimer's, and drastic changes can take place within one year, according to "Declining Financial Capacity in Patients with Mild Alzheimer's Disease: A One-Year Longitudinal Study," an academic paper published in February's American Journal of Geriatric Psychiatry. A test of 55 individuals with a mild version of the condition revealed that 48% were able to understand investment options and determine returns, but one year later, just 26% could do so.

Individuals with Alzheimer's also lose their ability to detect the risks of fraud from mail or telephone solicitations, the study found. At the baseline, 66% of the mildly afflicted patients were able to do this, but that number dropped to 44% a year later.

Sometimes the hallmark memory loss isn't the only sign of developing Alzheimer's. Advisers have learned to look for other signs such as excessive anxiety about money, difficulty comprehending directions, and changes in spending behavior.

An 84-year-old widowed client in the early stages of Alzheimer's became obsessed with small fees on her investment portfolio of more than $2.5 million, according to Robert De Hollander, a Greenville, S.C.-based adviser with Ameriprise Financial Inc. of Minneapolis. "She had the financial independence to do what she wanted, but she was stressed out over nickel and dime fees," he said.

To alleviate that anxiety, Mr. De Hollander stepped up his paper trail and communication with the client, providing her with quarterly portfolio reports and written documentation of every meeting. He also had written permission to share the information with her children so that they were also aware of her finances.


Attorneys offer other pointers to help advisers cover their ethical bases by ensuring that they protect their clients' assets from falling into the wrong hands.

Understanding a financial product requires a higher level of mental capacity than a will, so advisers must tread lightly, said Patricia Elrod-Hill, an elder law attorney at an eponymous firm in Norcross, Ga.

Some attorneys recommend that advisers follow their lead and look to the lawyers' ethical canon by maintaining a fiduciary relationship, taking protective action if a client with diminished capacity is in danger and protecting confidentiality.

Advisers may ethically breach confidentiality if they reasonably think that a client is in danger, but only to the extent necessary to protect the client's best interests, said Ron A. Rhoades, an attorney and chief compliance officer for Joseph Capital Management LLC in Hernando, Fla.

Durable power of attorney, revocable living trusts and written permission to contact successor trustees, attorneys or accountants should be dealt with prior to any sign of diminished capacity, attorneys said. Family meetings are also recommended to discuss which child has legal power and what should be done in the event of the onset of Alzheimer's, Ms. Elrod-Hill said.

"Sometimes it requires a counselor to get through this, but it's important that the whole family meet so there are no questions and no fighting later," she said.

Nevertheless, children can have a conflict of interest, and advisers need to be aware of that.


"Who is the client is always critical," said Donald N. Freedman, an elder law attorney at Rosenberg Freedman & Goldstein LLP in Newton, Mass. "We'd like to foster a relationship with the child, but this is the parent's money we're talking about."

Even though advisers are gearing up with confidentiality waivers and teaming with attorneys to ensure that they are aware of all the legal nuances related to impaired older investors, they stress the importance of keeping these clients involved in the advisory relationship.

For instance, Pamela G. Shortal, a managing director of Harris SBSB in McLean, Va., has a client who is in the early stages of Alzheimer's who still benefits from meeting with an adviser, even though his wife is now in charge of his finances.

"It was a joint decision to hire us and a joint decision to have us oversee the entire portfolio," said Ms. Shortal, whose firm manages $1.9 billion. "The husband will continue to decline, but right now, he knows enough to understand that they're both in good hands."

E-mail Darla Mercado at


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