How Advisors Can Protect Clients In Cognitive Decline

Experts say advisors have an important role to play in the lives of these clients and their families.

This topic was the focus of a new LIMRA Retirement Income Institute paper, "Decision Risk and the Desirability of Protected Income."

The paper's author, Chris Heye, CEO and founder of Whealthcare Solutions and Whealthcare Planning, told ThinkAdvisor this issue is personal as his mother, aunt, grandmother and former mother-in-law all suffered from dementia. He said this is a modern problem, as life expectancy has generally increased steadily over the past several decades.

"If you were born in the late 19th century, if you made it to 65, you were in an extreme minority," he said. "So, we didn't need our brains when we were 65 or 75 because we were dead."

Even as modern science may be able to keep the rest of the body going, combating mental deterioration has been more difficult, said Heye.

"We're keeping people alive longer, but we haven't developed similar therapies to help people's brains function longer," he said.

Randy Bruns, principal at Model Wealth in Naperville, Illinois, said he has experienced this firsthand, as many of his clients who were in their 50s and 60s when he started in the industry 26 years ago are now in their 80s and 90s or have died.

Bruns said the best defense is early planning, including naming trusted contacts on accounts and establishing durable powers of attorney for property before any issues arise. In addition, he said simplifying income to reduce decision risk is key.

"We prioritize Social Security, pensions and annuitized income to cover essential expenses, creating a dependable 'paycheck' that requires fewer ongoing decisions," he said. "That protected income can be a powerful safeguard. In cases of cognitive decline, guaranteed income streams help ensure bills get paid regardless of market conditions or decision-making ability."

Amy Drury, financial planner and owner of Stewardship Concepts Financial Services in Spokane, Washington, focuses on helping retirees with over $1 million in retirement accounts with investment management and tax strategies. She said she has worked with clients experiencing cognitive decline, and in some cases, it has made them more vulnerable to financial fraud.

"In one situation, we used annuities as part of the solution because they helped limit access to large withdrawals and added a layer of protection around the client's assets," she said. "We also worked closely with trusted family members who had legal authority to assist with financial oversight."

Bringing in others early is important, said Bruns, as waiting too long can create confusion or conflict.

"Introducing trusted family members during the early retirement years leads to smoother transitions later," he said.

Similarly, Heye said he helped put together what he called a "financial wellness team" for his own mother, including trusted family members, friends, financial professionals and doctors.

"At some point, none of us should be making important financial decisions on our own," he said.

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