Advisors are very busy people, and now here’s something else for them to add to their to-do lists: help clients and their families face the facts about cognitive decline and how it affects financial decision-making skills.
Despite the vivid reminders of what happens as we age — from forgetting to pay a bill to coping with a diagnosis of Alzheimer’s disease — the majority of Americans avoid talking to their children and families about planning for the inevitable, according to a survey by the National Endowment for Financial Education (NEFE).
Conducted online by Harris Interactive in November among 2,059 U.S. adults, the survey finds that seven in 10 Americans say “major barriers” prevent them from communicating about who will make financial decisions on behalf of an aging family member unable to make them due to cognitive decline.
“Americans are living longer and they have concerns about becoming a burden to their loved ones,” said NEFE President and CEO Ted Beck in a statement. “But with aging comes a high probability that mental decline can occur, and without a financial plan, the burden looms.”
Forty-seven percent of NEFE survey respondents said they or family members with cognitive decline have had trouble paying bills, whether paying them late or not at all. A full 36% reported difficulties calculating simple math problems; 35% made irrational purchases; and 21% depleted their savings accounts.
Yet the majority of people said that family dynamics got in the way of trusting a relative to make financial decisions, according to the NEFE, a Denver-based private nonprofit foundation with a mission of educating Americans about personal finance. NEFE is funded by its own endowment, which was established with proceeds from the 1997 sale of the College for Financial Planning’s assets, including a building and the rights to its professional education programs. The nonprofit offers a Smart About Money site to help consumers with financial planning decisions.
“Frequently there is defensiveness, denial, embarrassment and sibling rivalry when entering into a dialogue between adult children and a parent concerning their finances,” Beck said.
In many cases, that puts advisors in the position of creating a financial plan and helping an aging parent select who they prefer to take leadership of their finances. Read on to learn about the NEFE’s top four tips for helping clients and their family members face cognitive decline issues.
1) Gather information. Urge families to take the time to learn as much as they can about the illness or medical condition that is impacting an aging family member’s financial capacity. Attend support groups and reach out to experts who handle matters related to Alzheimer’s, dementia or other diseases. If a parent’s cognitive decline is due to grief, reach out to a grief counselor.