Regulators must address savers’ cognitive decline

The aging of the American population raises issues that at one time received little attention. Over the past several years, for example, more and more financial institutions have come to be concerned about what they should do when they detect evidence of cognitive decline in their older clients. In the past, when there were fewer such incidents and perhaps less concern about personal privacy, a banker or adviser might informally check with family members or sometimes personally take steps to make sure the client did nothing untoward. 

Today, unfortunately, cases of cognitive decline are much more prevalent, and the informal and below-the-radar approaches that addressed the issue in the past are inadequate to the current challenge. 

The Securities and Exchange Commission, the Financial Industry Regulatory Authority Inc. and the Social Security Administration have addressed the issue and put into place policies and procedures. An article by Emile Hallez on page 4 describes the Department of Labor’s efforts to grapple with concerns about cognitive decline among participants in qualified retirement plans by trying to figure out how the plans and those working with the plans should deal with participants who may be suffering from dementia, Alzheimer’s and similar afflictions. 

In a report to the DOL’s Employee Benefits Security Administration, a department advisory panel found that plan sponsors, advisers, record keepers and others in the ERISA community were generally unsure of their role in addressing the issue. The panel found no best practices, standards or easily found or widely disseminated guidance about what to do. 

Based on input from industry participants, the advisory panel recommended that the DOL issue guidance for plan fiduciaries about how they could voluntarily establish their own policies and procedures on the topic. This might include restricting account access when they suspect a participant is a victim of financial exploitation or has become incapable of making sound financial decisions. It could also mean encouraging plan participants to grant power of attorney to someone they trust. 

ISSUING GUIDANCE

We urge the DOL to proceed quickly with issuing guidance in this area. As the advisory panel noted, citing U.S. Census data, the percentage of the U.S. population over the age of 65 is on track to increase by 44% by 2040, to nearly 81 million people. What’s more, and of particular interest to the retirement plan community, is that the panel found that 22% of individuals age 60 and older keep retirement assets in their former employer’s plans when they retire or are terminated, creating questions about tracking and the ability of those people to manage their account. The sheer numbers underscore the growing need to address the issue of cognitive decline among the aging.

We also encourage the DOL to look at relevant SEC and Finra guidelines to arrive at recommendations or guidance to foster a uniform regulatory approach to the issue. Conflicting guidance only results in delays, needless and costly legal sparring, and absence of protection for the vulnerable.

Whether or not they ever envisioned themselves as front-line workers dealing with our aging population, financial advisers now find that they are. They deserve all the support policymakers can provide.