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When Older Clients Falter: Mary Malgoire on Advisors’ Role

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In a Research magazine cover story published last summer, author Michael Finke quoted a man who bluntly asked how to invest in his old age: “What do I do when I get stupid?”

An inability to understand money and credit is one of the first stages of dementia, according to research by Daniel Marson, a neuropsychologist at the University of Alabama, Birmingham, published in the American Journal of Geriatric Psychiatry. This means financial advisors may be the first to see signs of mental decline in older clients. In fact, 84% of advisors in a 2009 Fidelity survey thought they had clients with declining mental capacity and 96% said they did not feel prepared to deal with it.

Mary Malgoire, founder of The Family Firm, an advisory firm in Bethesda, Md., has given this issue a great deal of thought. In an excellent workbook, “Financial Tips for Adult Children of Elderly Parents,” she offers guidelines not just for children of aging parents, but also for advisors, CPAs, eldercare attorneys and other professionals. To find out more about how to handle signs of dementia, I interviewed Malgoire in March.

Olivia Mellan: How do you start the conversation if you believe a client is failing?

Mary Malgoire: If the older person’s adult child is also your client, it’s relatively easy to ask, “How are Mom and Dad doing?” or “How’s your Dad doing?” But this is a landscape that the child has never walked through before. So at the same time, you might want to ask some questions to tip them off: “Is Dad keeping up with the bills?” or “When you visit, does the fridge have enough food in it?” Eating well is a particularly important consideration when a parent has been widowed.

It’s important for the child to be observant. “Has Dad had any trouble driving?” “Are they finding places they’re driving to OK?” One of the things that tipped us off in two different cases was that elderly clients were having trouble getting to our office, when they had no trouble in the past.

When you’re addressing this subject with an elderly client, it’s a little bit more difficult. You start out with easy questions like “Did you have any trouble getting here today? How was the traffic?” If they trust you and have a good relationship with you, they might say, “I took a bunch of wrong turns and got lost.” Then you might ask, “How are you doing with staying on top of the bills?” This can be a casual conversation; you don’t want it to look like item one on the agenda is “Check in about how they’re aging.”

OM: So you think advisors should be proactive if they notice that a client is having problems?

MM: Diagnosing cognitive impairment isn’t our job, but we can explore areas of concern to help a client function and get the help and support they need.

For example, we had a woman in her late 80s—a widow whom we’d worked with for more than 10 years and knew very well. Over the course of eight months or a year, we noticed she had trouble finding our office. She couldn’t remember getting to places, and organizing events was becoming difficult. We asked if we could speak with one of her daughters, who lived far away. We said to the daughter, “We think it’s time for you to move your mother closer to you; she can’t live alone any more.” The daughters collaborated and moved the mother into a good assisted-living situation closer to one of them, and it worked out fine.

OM: Is there anything you do at the beginning of a relationship to prepare for a possible mental decline later on?

MM: We do have a form that we sit down and fill out at the start of a relationship. I borrowed the idea from a NAPFA member, and I think it’s a best practice that advisors should adopt.

We tell the new client, “We routinely ask some questions as part of getting acquainted, so I don’t want you to feel offended by them.” Then we ask, “Who pays the bills? Are you staying on top of the bills?” For widows or widowers, we might ask, “Do you have friends you go out with a lot?” With older parents we ask, “Do you see your kids often?”

For single clients who live alone, we also ask, “If we start to see that things are getting more difficult for you, who should we call?” They indicate the name and we put it in writing and they sign it. We call it the “incapacity form.” It’s not a legal document, but it says, “I prefer that you first discuss things with me”—they check that [on the form]—“and then, if you need to contact someone else” and so on. This form was suggested by NAPFA member Nancy Nelson.

OM: One thing I particularly love about your approach and your booklet is the Pledge to Care.

MM: We believe this pledge is extremely important. From the perspective of the elder person, aging is very scary and very difficult, especially in one’s 80s and 90s. Their memories are fading, their attention isn’t as sharp. So the point of the Pledge to Care is for the adult child to assure them that he or she will act in their best interest. However, because of the potential for misuse, the pledge should only be used when everyone’s intentions are honorable.

I wrote the pledge from the standpoint of the financial aspects, which I think a lot of elderly people are worried about. “Can I live in my own home? Do I have concerns about whether my children will take my money?” There are lots of situations where an elderly person should rightly be concerned. This is designed to help them feel that their adult child has given them assurances of acting in their best interests. The client and their elderly parent or adult children sign it, not the financial advisor.

OM: What prompted you to create it?

MM: One of my colleagues at NAPFA, Carolyn McClanahan, is a big advocate of “engagement standards” in the volunteer community of NAPFA. Basically, this means having an agreement with the volunteer as to what they’re getting into and securing their commitment to provide the time to get the work done. It occurred to me that this would be a great idea for adult children and their elderly parents.

We’ve posted the workbook on our website, as well as a sample pledge for siblings who need to share responsibility for the parent. The Sibling Pledge to Care includes things like “I will participate with an open mind. I will participate with integrity. I will not attempt to act on our parent’s behalf without the legal authority to do so.”

Since an elderly person may be worried about the kids sharing information and plotting against him or her, another important thing is confidentiality. The pledge might say, “I will maintain the confidentiality of your information.” They also commit to keeping the elderly person informed. 

This pledge has two sides. First, it helps the elderly person feel they have an ally in their child or children or whoever signs the pledge. The other purpose is to help the adult children understand what their responsibilities are, to give them some guidance and to help them recognize the boundaries within which they have to work. They need to understand that they can’t change a legal document or take charge of Mom’s affairs without the authority to do so, and that they’re agreeing to spend the time it takes to fulfill the obligation they’re committing to.

OM: Switching roles is hard. You want to protect a parent who may not be able to care for her finances any more, but it’s important to let her retain her dignity.

MM: The thing is, there’s a whole predatory community after these elderly people. A woman told us, “My mother is addicted to catalog buying. She likes to buy sweatshirts. So the catalog company puts her on speed dial.” If that means she’s spending money on sweatshirts that she needs for her living expenses, that’s a real crime. We should know when a client or a client’s parent is at risk.

At the same time, if your mother has a favorite thing she likes, you shouldn’t try to take that away from her unless it’s a real threat to her financial security. A financial advisor can help sort this out by saying either that there’s enough money or that she needs to be careful.

OM: It’s encouraging to me that advisors are becoming more aware and active in helping their elderly clients. Perhaps we’ll see more emphasis on this in training or continuing education courses?

MM: We have to decide what kind of advisors we are—whether we get in there and help solve real problems or just push investments around, especially when there are problems that clients can’t articulate and don’t know they have.