Senior woman (Photo: Shutterstock)

Welcome to Hidden Value, the column where Joe Elsasser, CFP, addresses common financial planning issues with insights advisors and their clients may not have considered.

Delicate situations, like advising a client in the early stages of dementia, require special care and attention to ensure you are protecting clients’ financial interests.

I can’t fathom how difficult it must be for someone who experiences dementia. At the early stage, there can be some denial. Your clients may not believe they have dementia. They probably notice that some things are harder than they used to be, but they can’t put a name on it or they are too scared to consider the possibilities.

Fortunately, the Senior Safe Act has empowered financial professionals to protect these vulnerable clients. Financial advisors need to be a natural part of the discussion for a few reasons: You’re touching on estate planning, you’re asking whether or not they have a medical power of attorney and a financial power of attorney, and advisors have more information about accounts and assets than anyone else.

Financial advisors can do a few things to make this difficult situation easier and add additional value to their most vulnerable clients:

  1. Discuss and document a process for bringing in a trusted contact. Discuss the circumstances under which you will inform their secondary contact. Suggest a meeting with the client and their secondary contact early in the financial planning process to ensure they have a good grasp on the overall financial process and under what circumstance they may be asked to get involved. Reassure your client’s family that you’ve protected them from hurting themselves financially.
  2. Document every phone call and interaction with the client or the family. Documentation is critical to protect your practice and also to protect the client. If your client calls and asks the same question of three different people at your firm, document every conversation, so collectively, you can see the signs that that may point to dementia.
  3. Build connections and resources so you can refer clients to other experts. If you’re an advisor serving an aging clientele, consider creating a list of resources to give to the client and their family. It is helpful to be able to refer the client to medical professionals, elder law attorneys and social service professionals in your network for additional support and guidance. While you can protect the client financially, they need significant assistance from other professionals to protect their safety in other aspects of their lives.
  4. Help the client clearly see how this might affect their financial future. Trained advisors should be able to project how much the client can expect to invest in facility or respite care without negatively impacting a surviving spouse or the client’s goals.

Good advisors care about their clients’ lives, and watching somebody struggle with dementia is painful. In these cases, the most important thing you can do is clearly and rationally explain the impact of every financial decision throughout this difficult and emotional time.

For any financial decision it’s important to ask, “Does this decision clearly help my client achieve their goals?” Sometimes the beneficiaries of an eventual inheritance can be at odds with the client’s goals. Sometimes the trustees might disagree with a financial decision that is in the best interest of your client. These are very tough situations for advisors. Advisors have the opportunity to remind the power of attorney of the goals that were explained through the initial planning process, and try to influence financial decisions to continue to meet those goals.

Elderly clients who are suffering from dementia are the most vulnerable. It is a difficult situation for everyone involved, but a good financial advisor can make a huge difference and protect these clients and their financial future. Prepare in advance and follow the steps that ensure your vulnerable clients’ financial goals are secured.

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Joe Elsasser, CFP, Covisum

Joe Elsasser, CFP, RHU, REBC developed Social Security Timing software for advisors in 2010. Through Covisum, Joe introduced Tax Clarity in 2016.

Based in Omaha, Nebraska, Joe co-authored “Social Security Essentials: Smart Ways to Help Boost Your Retirement Income.”