What would you do? My client, Alice, seems confused. Last week she called to request a withdrawal of $50,000. Today she is calling again to ask for $50,000. She doesn't remember the request she made a few days ago and she can't seem to explain the purpose of this withdrawal. Is something wrong with Alice? Or is this simple forgetfulness, which happens to all of us? Is someone, perhaps, taking advantage of her? What would you do?
Did you know that medical research confirms that difficulty managing personal finances
can be a sign dementia is developing? This means financial professionals may notice a client has a problem before anyone else does. A client in the early stages of cognitive decline can make really expensive financial mistakes, often before friends or family notice. How can I efficiently help Alice protect her finances and also help her maintain a sense of independence?
(Dive deeper on dementia: Financial advisers in a bind when serving clients with Alzheimer's)
We have given a lot of thought to how we can protect our clients. Our job is to help our clients live as well as they can with the resources they have, and also help them plan for risks we all face. Dementia is a significant risk. Nearly one in five women and one in ten men will develop dementia.
Here are a few things we do to efficiently serve and protect clients in case they develop dementia.
1. Client advocate: We ask our clients to name an emergency contact. We call this a Client Advocate Designation.
2. Conversation: We encourage our clients to have a conversation with their family and friends. Who will assist them with money if they need help? How should that person help?
3. Introduction: If we are concerned, we encourage our client to introduce us to his advocate. As is the case with visits to the doctor, it can be helpful to have someone at meetings to help listen.
4. Doctor: We recommend our client see a doctor.
5. Update plans: We guide our client to update her legal and financial plans. Most forms of dementia are progressive so our client will probably get worse. Of course, the cost of care can be substantial.
6. Care plan: To help clients develop a care plan, we refer them to a care management professional who is familiar with all the care resources in our area.
7. Training: We provide our professionals with training in communication skills, which can make it much easier to guide clients who have dementia.
If a person develops dementia, she faces two significant risks. First, and most obvious, the cost of care can be very high. Second, a person with dementia can make costly financial mistakes. Advising these clients can be very time-consuming and frustrating for professionals who lack preparation. With some thought, we can save ourselves a lot of time and help protect our clients, like Alice. When we are here for a client and her family during a time of great challenge, we lay the foundation for a valuable relationship with this family for generations.
Steve Starnes is an adviser with Savant Capital Management in McLean, VA. He can be reached by email here.
