Difficulty managing money is one of the earliest signs of Alzheimer’s and other forms of dementia. So when a financial adviser’s client begins showing signs, the adviser and the client’s family need to take steps to avoid tragic results — from elder financial abuse to an unwitting depletion of savings to ill-advised spending to missed bill payments.
“Longevity increases the incidence of dementia and if you’re fortunate to live long enough, that may cause you to not be able to make good financial decisions,” said Stig Nybo, President of U.S. Retirement Strategy for Transamerica Retirement Solutions. “But when would financial advisers be able to make that determination? And once they realize it, how should they deal with it?”
Financial Planning in the Shadow of Dementia
To answer those questions and help the loved ones of people with this irreversible, fatal brain disease know what to do, Nybo’s parent company — financial services firm Transamerica — and MIT AgeLab last week held a fascinating and moving symposium I attended: Financial Planning in the Shadow of Dementia. I want to pass along a few practical tips I heard.
(MORE: Dementia, Couples and Money)
The genius of the Cambridge, Mass. symposium is that it brought together a broad spectrum of experts ranging from Alzheimer’s Association execs to neurology professors to financial advisers to people who have early onset Alzheimer’s or are married to them.
The timing couldn’t have been better. According to Transamerica, financial advisers serve, on average, seven clients living with Alzheimer’s. But, in my opinion, the financial services industry hasn’t done much to focus on this challenge.
“Financial advisers don’t take you down the path of worst-case scenarios,” said Michelle Palomera, of Scituate, Mass., whose husband, Ken Sullivan, was diagnosed with early onset Alzheimer’s at age 47. “They’re always talking about what does retirement mean to you?”
Said Steven A. Starnes, a financial planner at Savant Capital Management, in McLean, Va.: “Our role is to help people maintain a sense of independence and live well for as long as possible — not ‘You have a problem, let’s address it.’ I think the medical and caregiving communities are a lot better at communicating about this than financial professionals.”
A Growing Challenge for Financial Advisers
Today, more than 5 million people in America have dementia; by 2050, that number may well be closer to 16 million, said Harry Johns, President and CEO of the Alzheimer’s Association.
The need to protect them financially, clearly, is enormous and growing.
(MORE: How Aging Impacts Our Financial Decisions)
“In the early stages of declining financial capacity, a person can really make expensive financial mistakes,” said Starnes. “But since one of the first things people with dementia have trouble with are financial matters, we are one of the first people to notice if something’s wrong.”
A Framework for Discussions
At the conference, Transamerica and MIT AgeLab unveiled a helpful tool the AgeLab researchers have developed: a five-element framework that advisers can use to lead conversations with clients in the mild decline stage of Alzheimer’s, and their advocates:
1. Assets: It’s especially important for advisers to know whether someone with dementia owns a home and, if so, whose name it’s in and its value. If the client will use Medicaid to subsidize nursing home care, his or her home (and other assets) could be confiscated after death to recoup expenses.
2. Current and future income sources and insurance policies: Advisers need to know whether the client has an employer-sponsored health plan covering care for dementia or a long-term care policy as well as how long-term care would be paid for, in general. “Take whatever number you think it will cost and multiply it by three or four,” said Bill Ferguson, of Medford, Mass., whose wife, Rita, was diagnosed with Alzheimer’s in 2006.
(MORE: Alzheimer's: Creating a Financial and Legal Plan)
3. Intentions: These range from whether the client has a financial power of attorney and a durable power of attorney for health care to whether he or she has considered assisted living or a nursing home.
A side note: Legg Mason Global Asset Management and The Center for Innovating Care in Aging at the Johns Hopkins University School of Nursing has an excellent guide to housing alternatives — Aging and Its Financial Implications: Planning for Housing. Legg Mason’s Kathleen Pritchard, Managing Director, Head of Advisor Business Development, said that housing options and costs are “the most important financial conversation advisers are not having with their clients.”
4. Banking administration: Over time, the client will need more help managing day-to-day finances, including paying bills. The adviser needs to see that a plan is in place (automatic bill paying, direct deposit, perhaps a joint account with a family member or a daily money-management service) and, if not, to work with the client’s advocate to create one. The American Society of Daily Money Managers site has a directory of professionals that families could hire.
5. Care management: This is about launching an essential, if sensitive, conversation about how to finance and facilitate care when the disease progresses and caregiving demands intensify. An adviser might recommend the client’s family hire a geriatric care manager; there’s a directory of them online at the site of The National Association of Professional Geriatric Care Managers.
Warning Signs of Dementia
The Transamerica/MIT AgeLab’s new booklet, The Advisor’s Guide to Financial Planning in the Shadow of Dementia, said some clients may be uncomfortable sharing their diagnosis in the early stages. What’s more, speakers noted that it can be difficult for advisers to determine whether a client is showing cognitive decline due to cognitive disorders like Alzheimer’s or just due to normal aging.
“People in financial services aren’t trained clinically to test individuals for cognitive ability, but there’s great value for them to be trained on warning signs,” said Daniel Marson, a neurology professor at University of Alabama Birmingham, where he’s the Director of the Alzheimer’s Disease Research Center.
A few of the warning signs, according to Marson: when someone is more irritable than in the past or looks different; memory lapses such as forgetting to pay bills or buying three pairs of shoes instead of one and a new interest in pursuing get-rich-quick schemes.
“Another sign is disorganization. When someone who might have been scrupulous in the past now comes into your office with a brown paper bag of documents or his neat, orderly desk is now littered with papers and several months of unopened mail,” said Marson. “Then you realize something dramatic has changed.”
Also: mental math errors and a new confusion about financial concepts. For example, “if you’re at lunch and he’s trying to figure out the tip and asks for your help because doing the percentage problem is now a bit of a challenge,” said Marson. Or “if the client has difficult understanding basic financial terms he understood five years ago.”
Marson’s advice for families who suspect a loved one may have dementia: See how long it takes the person to handle normally straightforward financial tasks such as paying bills.
“With mild cognitive impairment, a person can complete financial tasks, but does them much slower than before. If you notice a new slowness, that can be a warning sign,” he said.
The Importance of Client Advocates
Starnes urged advisers to get names of emergency contacts — client advocates — from all of their clients, because it’s impossible to know when they may be needed. “We always insist both spouses come to our client meetings, so if something happens, they each have a foundation for a trusting relationship and the spouse will be in a better position to step in.”
When possible, Starnes said, clients “showing signs of decline” should bring these advocates to the meetings with their financial advisers.
“Invite the client to introduce the person to you,” said Starnes. “Frame it that ‘If you need help, we want to have a relationship with a person who will help you.’” Starnes believes that “every tough conversation is solvable if you take the time and have a relationship with that person’s advocate.”
When the symposium ended, MIT AgeLab Director Joseph Coughlin urged attendees to email him at agelabinfo.mit.edu if they had recommendations for “where we should go next.” I’d urge you to email Coughlin if you have any, too.
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