How Financial Advisors Are Becoming Financial Caregivers

At the risk of stating the obvious, your clients will likely need help with their finances as they age. However, I’m not talking about the type of help you’re currently providing, such as making sure your clients’ money will last through their retirement. I’m talking about help with planning and daily money matters if they experience cognitive decline. This could entail protection from fraud and scams, ensuring bills are paid, or making sure trusted family and friends are involved. 

Financial decision-making ability declines with age, according to a study by the Rush Memory and Aging Project. The study found that the average number of financial literacy questions answered correctly fell from nearly 70% to about 60% for every one-unit decline in age-related cognition. So even those who remain healthy later in life still could be at risk of making serious money mistakes and becoming victims of fraud.

What this means is that your clients aren’t just going to need a financial advisor as they age. They’re likely going to need a degree of financial caregiving — from someone who can help them stay on top of day-to-day financial matters and help protect them from scams.

What Is Financial Caregiving?

A survey by Merrill and Age Wave found that 92% of caregivers provide financial caregiving versus 64% who provide physical care. 

Financial caregiving typically involves overseeing or handling a loved one’s daily money tasks, such as paying bills, monitoring accounts, handling insurance claims, preparing taxes and guarding against scams and fraud. It can even involve helping pay for a loved one’s care. According to the Merrill survey, financial caregivers often step into their role without adequate training and support. 

Ethically, advisors can’t serve as a client’s power of attorney — nor would you probably want to take that degree of control. However, you have a vested interest in protecting assets, assisting with wealth transfer between generations and ensuring that there is another person or system in place to oversee daily money matters if needed.

So how do you provide support for your clients — during a stage of life that can last 20 years or longer — without overstepping the boundaries or creating too much work for you and your practice?

Know the Signs That Your Clients Need Financial Caregiving

It can be hard to recognize that a client is experiencing cognitive decline and needs additional support. In fact, your clients could be having trouble managing money matters well before there ever is a diagnosis of dementia. A new study by researchers at Johns Hopkins Bloomberg School of Public Health found that those with Alzheimer’s disease and related dementias are more likely to miss bill payments as early as six years before a diagnosis. 

There are some other telltale signs that you should keep an eye out for with clients. I witnessed many of these first-hand with my mother, who had Alzheimer’s disease, and the Alzheimer’s Association notes that these are early signs:

• Reliance on memory aids: If you start noticing that clients are bringing in documents or calendars with sticky notes or written reminders on them or are increasingly relying on memory aids, this can be more than just a typical sign of aging and forgetfulness.
• Going from organized to disorganized: Be wary if a client who once brought in folders of neatly organized documents is now bringing in stacks of disorganized statements and papers.
• Showing up late or missing appointments: A punctual client who now frequently shows up late or misses appointments could be having trouble keeping track of times and dates, which can be an early sign of dementia.
• Repeating questions: It’s one thing if a client asks you to explain something more clearly. It’s another thing altogether if a client is frequently asking questions then asking those same questions again shortly after hearing your answers. 
• Changes in judgement: You have every right to be concerned if a once risk-averse client is now talking about buying Bitcoin or some other risky investment. Also be wary if there’s a change in spending habits, such as large purchases or large withdrawals from accounts. 
• Changes in mood or personality: Dementia often is associated with confusion. But becoming fearful, suspicious, anxious, withdrawn or depressed also can be signs of Alzheimer’s disease.

How to Help Your Clients Get Support

Ideally, you should be talking with clients about how to prepare well before they ever need financial caregiving support. These conversations should involve the following:

• Asking clients for trusted points of contact and getting signed permission to reach out to those trusted contacts if you suspect the clients are experiencing diminished mental capacity.
• Helping clients decide which of their adult children or family members can be most trusted and capable of helping them with money matters as they age then encouraging them to name those people as their financial power of attorney.
• Encouraging clients to share details about their finances with their power of attorney so the POA doesn’t have to play detective if he or she has to step in and help with money matters. 

You and your clients’ financial caregivers also should take advantage of technology to monitor financial accounts and spot money mistakes your clients might be making before they become big problems. For example, the new Carefull service monitors financial accounts and alerts users when it spots something wrong, such as missed payments or changes in spending patterns.

If a client does experience diminished mental capacity and has to start relying on his or her financial power of attorney to help with daily money matters, consider inviting that financial caregiver to meetings or calls with your client. That will allow you and the financial caregiver to coordinate support for your client.

Cameron Huddleston is an award-winning personal finance journalist and author of “Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances.” She also is director of education and content for Carefull, a service that helps protect and organize day-to-day finances for older adults.