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Regulation and Compliance > State Regulation

Avoiding the Dementia Trap

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In the wake of the Glenn Neasham case, agents are concerned about their ability to sell annuities to elderly clients without getting charged with a crime. As has been widely reported, the Lakeport, California agent has been sentenced to 300 days in jail (reduced to 60 days, plus three years probation) for what the government claimed was felony theft from an elder. Neasham says he sold his 83-year-old client the equity-indexed annuity she wanted, and did so by the book. After she developed dementia symptoms several years later, the government brought charges against him, even though the annuity made her money.

[See: Annuity Sales in the Post-Madoff Era]

How should you respond to what some are calling a landmark case in the annuity industry? For starters, make doubly sure you are following all relevant senior protection laws in your state. If you’re not sure what they are, check with your state insurance and carrier compliance departments.

Also, make sure you are 100 percent compliant with your state’s annuity suitability regulations and that you follow the issuing carrier’s procedures for determining eligibility, establishing need, and making necessary disclosures.

The most difficult area is detecting behavioral signs that a prospect may have a cognitive impairment. This is especially difficult when you haven’t known a person’s baseline behavior. Still, it’s important to familiarize yourself with the early-warning signs of dementia. According to the Alzheimer’s Association, there are ten red flags to watch for.

  1. Memory loss that disrupts daily life. This is one of the most common early warning signs, most commonly affecting recently learned information. Watch for forgetting of important dates or names and asking for the same information over and over.
  2. Challenges in planning or solving problems. Especially common is difficulty working with numbers (example: balancing a checkbook).
  3. Difficulty completing familiar tasks at home, work, or leisure. Watch for difficulty managing a budget or filing or finding key financial documents.
  4. Confusion with time or place. Alzheimer’s sufferers often lose track of dates, seasons, and the passage of time. If a client often expresses confusion over the current day or hour, make a note of it.
  5. Trouble with visual images and spatial relationships. If you hand a client a document to review and they have difficulty processing the information, this may reflect a cognitive impairment. 
  6. Problems with words in speaking or writing. Clients may stop in the middle of a sentence and have no clue what they were talking about. Or they may not be able to find the right words to express themselves or use inappropriate words.
  7. Misplacing things or losing the ability to retrace steps. Repeatedly losing account statements or financial correspondence fits the dementia profile.
  8. Decreased or poor judgment. People with Alzheimer’s often have changes in judgment or decision-making. They may make inappropriate investments or charitable donations, or fall victim to phone or Internet scams.
  9. Withdrawal from work or social activities. If a client retires unexpectedly or becomes reclusive, this may indicate cognitive difficulties.
  10. Changes in mood and personality. A normally friendly client can become confused, suspicious, depressed, fearful, or anxious.

If you notice one or more of these red flags, immediately document them in the client’s file. If they persist, seek advice from your compliance and legal experts in order to determine appropriate next steps.