It’s never an easy topic to bring up and one that most financial advisors would probably say has little, if anything, to do with them.
Any client who shows signs of weakening mental capacities, though, is very much an advisor’s concern, says Richard Peterson, managing partner at San Francisco-based MarketPsych, just in case they ever have to face legal repercussions for having sold investment products to clients with dementia or some form of cognitive mental impairment.
In February of this year, an independent insurance agent who sold an indexed annuity to a woman in her 80s was actually sentenced to 90 days in jail on a felony theft conviction. The sentencing was unexpected, Peterson says, and it’s definitely not something that’s going to be an everyday occurrence.
All the same, financial advisors are having to expand their roles evermore and, through the application of behavioral finance principles, are becoming more deeply involved with their clients. It is part of their duty to be attuned to changes in their clients’ behavior, particularly when it comes to clients that they have known for many years, Peterson says, because changes in behavior can have a serious impact upon life savings and financial planning.
“With the baby boomers now aging, every advisor has clients that will show evidence of some kind of mild to serious cognitive impairment,” Peterson says. “Being aware of changes in their behavior and assessing their cognitive capability is another obligation now for an advisor who is on the front line.”
Most advisors, of course, are not psychiatrists or doctors, and they have not been trained to recognize the signs of cognitive impairment. That’s why MarketPsych has come up with the MEMRI checklist, a quick, easy-to-use tool for advisors who sense subtle changes in their clients’ behavior but are not sure how to assess it.
“The checklist is a simple tool. Let’s say it’s a value-add for financial advisors that helps them look more professional, can help clear them of any potential liability and enables them to provide that much more service to their clients,” Peterson says.