No doubt you have heard stories of older adults who suddenly stop paying bills, lose track of their assets or are tricked out of their savings by unscrupulous family members, friends or acquaintances.
Sometimes this isn't the result of fiscal irresponsibility. The fact is that the inability to manage money is one of the earliest indications that a client may have Alzheimer's disease.
And with an increasing number of Americans entering their retirement years, this demographic shift means that financial advisers can expect to encounter more and more clients with these and other health-related issues.
As a result of medical advancements, healthier lifestyles and improved diets, doctors are beating many forms of cancer and heart disease, and Americans are living longer. More than half of healthy 65-year-olds can expect to live to 85.
The benefits of a longer life include the opportunity to pursue interests and spend more time with family and friends.
One downside for people entering their 70s and 80s is that they are more likely to have a chronic condition, which may include Alzheimer's. Today, 5.4 million Americans are living with Alzheimer's disease, 5.2 million of them 65 and over and 200,000 under 65.
By 2050, up to 16 million will have the disease. Advisers will have more clients who can't manage their accounts or make accurate financial decisions.
That is why it is important for advisers to understand how Alzheimer's can affect financial capacity, how they can raise these issues with clients and families, and how to design and implement financial strategies to protect the client's interests.
RECOGNIZING THE SIGNS
Aging can result in some cognitive changes — minor lapses in memory, for instance. But they are generally minimal and don't affect daily living.
Initially, the signs that a client may be developing Alzheimer's can be subtle and may not be recognized by physicians, family members and even the affected individuals, who think that their difficulties are an ordinary part of aging.
It typically is not until a problem arises, such as the discovery of impaired financial capacity, that concern is triggered.
As these symptoms usually develop over months or years, family members may discover that accounts have been depleted by questionable purchases; financial records are in disarray; important bills, such as taxes or a mortgage, haven't been paid; or legal action is being taken against their loved one.
Even if middle-age clients understand that the risk of being diagnosed with Alzheimer's disease is significant in later years, not enough make planning a priority. There are a few things that advisers can do to focus their clients and to get them to begin planning before it is too late.
It is important for advisers to act now, while clients can still plan, make sound financial decisions and purchase insurance to protect themselves and their families.
Additionally, clients should:
• Complete a will, living will and durable powers of attorney for health care and finance.
• Discuss insurance options for the financial consequences of Alzheimer's disease, including long-term-care insurance, annuities and life insurance with riders that provide a benefit if chronic care is needed.
• For advisers' own protection and to ensure that they can effectively meet the needs of clients, they should document discussions with clients. For example, a note can be put in the individual's file: “We discussed the possibility of Alzheimer's and other serious conditions, the high cost of chronic care and insurance solutions. The client wasn't interested.”
Advisers with clients who already have Alzheimer's can help to meet their personal and financial needs by effectively managing their assets, building or strengthening relationships with their family members and being sensitive to their condition. Other actions you can take:
• Document meetings and conversations with clients and families.
• Assemble a team, including family members, who will be the principal care providers; an elder- law attorney, who decides if the client has the mental capacity to make financial decisions and establish advance directives; and a certified public accountant. To preserve the client's sense of control and independence, set up a checking account with a small balance or a credit card with a nominal limit.
• Help the client's family create an inventory of assets, insurance and income sources, such as Social Security and veterans or employee benefits. Help them set up a system to track expenses, particularly if the client is receiving chronic care at home, in an assisted-living facility or in a nursing home.
• Provide extra assistance to clients with Alzheimer's disease who live alone. These individuals have difficulty taking medications, preparing meals, getting medical care and managing money. Advisers can find other family members, enlist the help of a daily money manager and contact social services if no other options are available.
BENEFIT TO ADVISERS
Helping clients prepare for the potential financial impact of Alzheimer's disease and other serious health problems is just as important to their future as maintaining an appropriate asset mix and making timely investment choices.
Focusing on these issues also may provide a benefit to advisers.
Helping clients tackle these end-of-life concerns not only gives advisers the personal and professional satisfaction of knowing that they have helped clients achieve their goals, but also expands advisers' knowledge base and experience, giving them a competitive advantage within the industry.
Additionally, by working with a client's family members on these sensitive matters, advisers potentially strengthen their relationships with them.That could lead to winning their business or gaining referrals that lead to business with their relatives and friends.
Dr. Robert Porkorski is a physician and vice president for medical strategy at Prudential Individual Life Insurance.