Is There A Test for An Aging Client’s Diminished Capacity?

Is There A Test for An Aging Client’s Diminished Capacity?

Mar 20, 2017 | aging, Alzheimer's disease, diminished cognition, financial capacity, senior investor

Diminished capacity is sort of a catchall term that can mean different things. A person can have the capacity, for example to create a will or a trust, but at the same time that person might not have the capacity to understand the risks of buying a complex financial investment. Capacity is on a continuum. The more sophisticated the decision needed the more capacity it takes.

Is there any way to measure capacity? Is there a blood test or any other test? We have a number of things in the medical field that help give us clues and data, but there is no one, single thing that tells us for sure. We can't see inside a person's thoughts. What we do have is testing of the various areas of the brain, with standardized instruments, that give us information about how a person thinks. We call it neuropsychological testing.

What is neuropsychological testing?

Neuropsychological testing (using groups of related paper and pencil and verbal question and answer tests) can provide useful information to take the question of capacity outside the realm of speculation. Test data provides numbers, scores, something specific.

This kind of testing can give useful information about which tested parts of a person's cognitive function do or do not compare normally with the tested function of people of similar age and education. When a person falls below a measure of what is normal, and we have test scores to tell us where and how, it can give us guidance about whether to allow a person to keep making financial decisions.

Testing is underused in helping us find out about a person's mental capacity for numerous kinds of things, such as memory, following verbal instructions, understanding information and learning a new task. Not enough families know about it and request it and not enough others refer clients to the right source for considering it as a tool to give us more information. Perhaps older people resist it out of fear not "passing the test". If clients secretly know that they are losing their memory and do not want to be found out, they will strongly resist any suggestion of testing.

What can the advisor do?

If you are worried about a client who seems to be "losing it" and you aren't sure you have enough information about that, you can suggest that the client get a medical checkup, and that he ask the doctor to check into his memory. This is not a sure path to neuropsychological testing, to be sure. Unfortunately, doctors spend very little time with patients these days and a brief visit may not result in the follow-up testing you would like to have done. But in some cases, clients are willing, particularly when encouraged to do so by a concerned spouse or other family member. In spite of obstacles, know that this objective way of measuring things does exist and it can help everyone involved in the senior's life.

The client's primary care doctor may refer your client to a neurologist. The neurologist may prescribe this testing which is done by a licensed psychologist or neuropsychologist, who gives the results back to the neurologist.

You're not a doctor. But you don't have to be one to see the red flags of diminished capacity. If you are not sure just what to look for, learn all you need to know in an hour by clicking here. Learning best practices for diminished capacity can help you right away.

 

By Carolyn Rosenblatt, RN, Elder Law Attorney & Dr. Mikol Davis, Gerontologist co-founders of AgingInvestor.com

What Should You Say To A Client With Diminished Capacity?

What Should You Say To A Client With Diminished Capacity?

Mar 1, 2017 | aging investor, elder investor

We've all had them. Those clients who seem to be more and more forgetful. They're with it some of the time and other times, not so much. They call you multiple times asking the same questions. They repeat their stories to you. It gets scary is when they start wanting to do dumb things with their money.

Unfortunately most firms do not have clear and specific protocols for you to follow when a client begins to show those telltale signs that he's slipping mentally. Or that she is flat out vulnerable to manipulation by some unscrupulous person. You see it, but what can you say? You just carry on hoping it will get better or that family will take care of it. But that doesn't happen. Then what?

At AgingInvestor.com we think it is far too dangerous for you to simply ignore the problem, or expect someone else to take care of it for you. If a scammer takes Dad, you will know when those strange and unexplained large withdrawals start coming out of his account. Family can reasonably expect that you will do something to keep your client, their father safe financially. That's fair enough, but how do you start?

First, you need to document every instance of anything that you observe that shows you that your client's ability to make financial decisions is becoming impaired. You don't need to be an expert to see what's obvious. Multiple phone calls in one day with the same question is an example. When you explain something slowly and clearly enough for a high school kid to understand and your formerly sharp client doesn't get it at all, that's another example: easily confused. There are numerous signs.

When you have collected the signs over a period of say, six months or more, and you have carefully recorded them somewhere, it's time to bring your client in for a face-to-face conversation. If you are at a distance, this may have to be by phone but it has to happen.

Start with your concerns. For instance, you can say "Jack, I'm getting concerned about some things I've noticed with you over the last few months. I've heard you ask the same thing multiple times in the same day. I have noticed that you are forgetting some important things I've explained to you about your portfolio." Jack may push back and probably will. You follow up by calmly showing him or describing to him the dates and your documentations of instances. "See here's what I mean. This is worrisome to me Jack. My job is to be sure your money is safe and that no one tries to rip you off. When you forget a lot, predators are waiting to target you".

Then you bring the conversation to the ask. "Whom do you trust that we could involve in being a backup safety person with you, or just joining in on the decisions about your investments here that might be a reassurance for me that you are ok?"

If you were smart before the diminished capacity issue came up long ago, you would have had Jack identify two trusted others you could contact in this situation. You would have had Jack give you permission to disclose protected information with the trusted others and thus dispose of the barrier that stops so many: the privacy issue. All this would be in your client file.

People respond to this approach in various ways. If you know your client, you will know some words that may work best with him or her. The point here is that you need to have this conversation, which may initiate a series of steps to keep that vulnerable client with diminished capacity as safe from predators or his own foolish decisions as you can.

Here are some takeaways from AgingInvestor.com, where you can learn more on this subject.

  1. Face the issue that you have to address this, awkward or not. Diminished capacity must not be ignored.
  2. Document each and every sign of diminished capacity as you communicate with your client. Here's a checklist to help you.
  3. Open the conversation by making it your concern. You are worried about the client. You want to keep him/ her safe. You want to do your professional job.
  4. Have at the ready your trusted 3d party contacts for your client. Get your client's permission to involve the trusted others at the earliest opportunity.

Does this expand your role as a financial professional? You bet. But there is no escaping aging clients and the issues longevity brings. Be ready for them.

Carolyn Rosenblatt, R.N., Elder Law Attorney, & Dr. Mikol Davis, Gerontologist co-founder of  AgingInvestor.com

The Elephant In The Room: Financial Professionals With Diminished Capacity

The Elephant In The Room: Financial Professionals With Diminished Capacity

Feb 20, 2017 | aging, Alzheimer's disease, diminished cognition, elder investor, elderly, financial advisors, handling money for seniors, senior investor

Every profession is facing a common dilemma: what to do about your own impaired colleagues. When there is no mandatory retirement age, there is no one to say, it's time to quit. Do you think a colleague has dementia?

People are living longer than ever, continuing in their work longer than ever and sometimes they start to "lose it" before they decide to retire. As none of us are absolutely immune from Alzheimer's or other dementia, or anything that causes cognitive decline, we all need to consider what we would want if it happened to us.

Would you want a friend or colleague to tell you that you've got a problem with memory and maybe it's time to hang it up and rest? Would you want your legal department to embarrass you and tell you to stop handling other people's money because everyone knows you're no longer competent? It's a frightening thought.

Longevity can be great, but not when you are impaired. As a consultant with expertise in aging, I have seen cognitive impairment to a dangerous level in numerous professionals. One was a trial lawyer colleague, high profile and famous. No one stopped him from practicing law until he had nearly destroyed things. I have seen it in a business owner who founded his company and had been going to the office for 50 years. He was kicked out of his favorite restaurant and was physically harassing employees, his Alzheimer's had gotten so bad. No one made him stop until outsiders (myself and my partner, Dr. Davis) came in and created a plan to prevent him from entering the office again.

I have seen a judge with dementia fall asleep on the bench in the middle of lawyerly argument in court.

I spoke with the sister of a former bank president who had become a financial advisor. He had lost most of his wealth because he could no longer keep track of it and he was being taken advantage of. He was living in squalor before family intervened. During that time, he was still working as a wealth manager.

These are real cases. The message is that we need a strategy and a policy in any office with advisors who work into their senior years, to address the possible impairment that might occur.

There is a way to do this so as not to needlessly embarrass the affected person. There is a way to require that a person with memory loss confirmed by colleagues should step down and give up managing anyone's assets. This should thought out in every office. Clients need protection. It takes construction of a reasoned policy to address the impaired advisor confidentially by first requesting retirement and then mandating retirement if the advisor refuses to go along.

Pilots have a mandatory retirement age of 65. That would not work for many other kinds of professionals. But something has to be done. If you want some concrete action steps to put in place in your office, you will find them in our book, Succeed With Senior Clients, A Financial Advisor's Guide to Best Practices. Get your copy today by clicking here.

By Carolyn Rosenblatt, RN, elder Law Attorney, & Dr. Mikol Davis, Gerontologist co-founder of AgingInvestor.com

The Inner Workings of Clients’ Financial Decision-Making Ability

The Inner Workings of Clients’ Financial Decision-Making Ability

Sep 28, 2016 | aging, aging investor, Alzheimer's disease, diminished cognition, elder investor, elderly, finances for elders, financial advisors, financial capacity, handling money for aging parents, handling money for seniors, senior citizen investor, senior investor, seniors finances

The Inner Workings of Clients' Financial Decision-Making Ability

Whether you have a lot of older clients or just an occasional one, it's critical for every financial professional to understand whether a client can safely make decisions about money. It might seem straightforward when your client is able to carry on a conversation, talk about current events or make a joke. You assume she's fine, but it's not that simple. Conversational ability can mask a true disabling brain condition we call dementia. It does not reveal itself easily, particularly at the earliest stage.

The insidious onset of Alzheimer's disease or other dementia can sneak up on a client and affect the ability to exercise judgment about finances. To help your clients, you need to know the red flags of diminished capacity, a basic skill anyone can learn. You can get a free checklist to help your do that at AgingInvestor.com. But beyond that, it is critical to understand just how complex our capacity to make safe financial decisions is.

Research shows us that with the most common form of dementia, Alzheimer's disease, financial capacity is moderately impaired even at the very beginning of the disease process. By the time a client gets to the middle stage when symptoms are more obvious she is already severely impaired in her financial capacity. No one should be making independent decisions about finances with severe impairment of this capacity.

This financial ability is defined as "the capacity to manage money and financial assets in ways that meet a person's needs and which are consistent with his/her values and self interest." It is broken down into nine areas or "domains". These include cash management, basic money skills, bill payment, and financial conceptual knowledge. The ones an advisor is most likely to see and assess are knowledge of personal assets and estate and investment decision-making.

You may not discuss with your client whether he understands what a money market is but you will be ethically obligated to discuss the pros and cons of various suggested investments and the effect they will have on your client's overall financial picture. This is the area where older clients with impairment will not be able to process the information you are offering them. When they are affected by brain disease like Alzheimer's (over 5.5 million people are diagnosed now, with that number expected to rise dramatically) they will not be able to "get it". You are on dangerous ground if you proceed to recommend or sell any financial product in the face of serious doubt about a client's financial capacity.

Granted, many financial products are complicated and the average person may not grasp all the nuances. But when you believe your client is probably impaired and cannot understand any carefully worded explanation you give, you are exposing yourself to liability by going ahead with transactions for that person.

How could this get you in trouble? All of the regulatory agencies want you to keep your older clients safer and they have issued guidelines for how to do that. All of them want you to know the red flags of diminished capacity. Financial capacity is the most complex of the kinds of capacity a person can have. If you do not involve a third party to assist the client with financial decisions, you risk a bad outcome and regulatory prosecution. You also risk the heirs coming after you in civil lawsuits, charging that you should have known what everyone else knew at the time, that their mother/father was impaired and you should never have sold that, done that or caused the bad outcome.

This is a very real problem among financial professionals-- the failure to recognize and act on the warning signs of diminished capacity. If you are managing a retirement account for that client, beware even more. Acting in the client's best interest means that you need to understand when the client's financial decision-making capacity is going downhill.

This article just touches on the complexity of financial capacity. Everyone deserves to have a deeper understanding so you can avoid prosecution or questionable accusations about your recommendations or the client's investments. When the investment an impaired client went for at your suggestion loses money, you can bet someone will blame you if they can. Don't set yourself up. Don't make it easy for them to attack you.

The way around this risk of working with an impaired client is to have your client's permission to involve a trusted third party as a surrogate decision maker for all financial transactions. How you get that permission is the subject of another article and it needs discussion. In the meantime, take a deeper dive into the nuts and bolts of financial capacity in Succeed With Senior Clients: A Financial Advisor's Guide to Best Practices, available here. Chapter Two explains all you need to understand about the components of financial capacity. And the privacy question and how to get that trusted other involved is answered in the book too.

By Carolyn Rosenblatt, RN, Attorney, AgingInvestor.com

Are Advisors Miscalculating Retirement Medical Costs?

Are Advisors Miscalculating Retirement Medical Costs?

Aug 31, 2016 | aging, Alzheimer's disease, elder investor, elderly, finances for elders, financial advisors, handling money for aging parents, handling money for seniors

Are Advisors Miscalculating Retirement Medical Costs?

According to CNN Money, a 65-year-old, healthy couple can expect to spend $266,600 on out of pocket costs for Medicare premiums in retirement. If that's the advice you give clients about what needs to be set aside for medical expenses you're missing some major facts.

Medicare premiums are a relatively small part of what it can cost when health issues arise as people age. No one likes to discuss the subject of possible cognitive impairment, but it has to be done. We see it as the financial advisor's responsibility to bring it up, include medical expenses in the overall financial plan and get the truth out on the table.

According to a Wealth Management article on August 30, 2016, Fidelity Investments did a survey of over 350 advisors and found that 96 percent felt unprepared to help clients who had Alzheimer's disease. This is in contrast to the reality that a person's chances of developing the disease are at least one in three from age 85 and above. And we are living longer than ever in history. More centenarians, more Alzheimer's.

What is the real cost of caring for a person with Alzheimer's? I interviewed a high end home care agency owner about this question. Many HNW people do not have long term care insurance as they plan to pay for whatever they need out of pocket. Most are not aware of the cost of best quality 24/7 care they could need with their own longevity. In our work at AgingInvestor.com, we have encountered this scenario and have seen what best quality care looks like. It's not your average home care agency.

The cost for caring for one person at home with Alzheimer's from that agency is $300,000 per year. The workers are specially trained and well supervised. A care manager develops a plan and the workers take their shifts, prepared to deal with all manner of difficult dementia-related behavior, including violent acts and words, wandering out the door, refusing to bathe as well as those who are unable to express themselves verbally any longer. Non-specialty home care agencies do not accept this degree of client behavioral difficulty out of fear of their workers being harmed.

The ultra HNW client can pay for these costs but for everyone else, the expenses incurred with care for a progressive disease that escalates in difficulty over time could be devastating. The cost of home care is in the category "long term care" an often poorly understood subject among those outside the health care and insurance fields.

If you have clients who are at retirement age or are retired, it is a necessity that you educate them about these risks to their savings. When you work with them on their plans, you need to include the possibility, very real, that one or the other of a retired couple could develop dementia and need expensive home care. If you think they should just go onto Medicaid, think again. Every state has different rules but in all states a person can't have much left in the way of assets and savings in order to qualify for Medicaid. And most importantly, people typically want to stay at home as they age. The quality of care they are likely to receive on Medicaid for long term Alzheimer's care is low, and likely to be in a nursing home. No one wants that!

The takeaways

  1. In developing retirement plans for clients consider the risk that your client may develop Alzheimer's disease or related dementia. Bring it up and talk about it.
  1. Plan for significant savings to be set aside in case care is needed, not just for Alzheimer's but for any long term condition or disabling illness requiring help. Use real numbers, not vague assumptions.
  1. Do not underestimate the real costs of caring for a person with this kind of dementia. It can last as long as 20 years. Do the math for your clients and show them what they would need to be cared for at home with a long term expensive illness like Alzheimer's.

The responsibility to know about long term care costs is yours. To learn more about Alzheimer's and how to spot the warning signs, get a free checklist to get you started at AgingInvestor.com.