How advisors can protect clients with dementia

Society is living longer and diseases like Alzheimer’s are on the rise, so how do you deal with someone at risk of financial abuse?

How advisors can protect clients with dementia

It’s an issue that, sadly, looks set to become more acute. As the baby boomers age into the single largest generation of seniors in Canadian history, so the number of age-associated diseases, like Alzheimer’s, increase.

Advisors are often on the front line when noticing changes in client behaviour because of neurodegenerative disease that affect decision-making and the ability to understand finances.

There is also the risk of clients becoming targets of financial abuse, while caregiving is also becoming a more pertinent concern, especially for the so-called sandwich generation.

With more than 747,000 Canadians now living with Alzheimer’s and other forms of dementia, May and June marks the beginning of the annual IG Wealth Management Walk for Alzheimer’s.

Christine Van Cauwenberghe, vice president, tax and estate planning at IG Wealth Management, said those afflicted may have significant assets, complex estates and multiple children, which often involves competing interests and people pressuring them into making certain decisions.

She told WP that navigating all this while trying to manage symptoms, by extension heavily involves the advisor.

“The first issue is how to deal with the client themselves. Many don’t actually want to admit that they are struggling and are concerned that as soon as they tell the advisor that they have dementia or have a problem, they will be cast aside and no longer have control over their affairs.”

This is made difficult because, generally, people experience a gradual decline. It is down, therefore, to the advisor to ask them if they are ok and to reassure them. Van Cauwenberghe said it’s also up to the advisor to adapt and possible change the way they service the client.

She explained: “For example, do you need to move investments into something more conservative or consolidate? Maybe this is the time an advisor would go meet a client in their home or in an environment that they are comfortable with or used to?

“Is there a better time of day to meet? For example, if a client is taking medication in the morning and feels groggy, maybe they would make better decisions in the afternoon when they are feeling better.

“If the client still doesn’t want to admit there is a problem, every client should plan for the future and make sure there is a plan in place for when they can make decisions. Do they have a power of attorney? If you don’t, can we make sure there is a plan in place for when they can’t make decisions? Can we get permission to call certain family members in emergency?”

She added that one strategy is to have a transition period where the client gets used to giving up control gradually over a period of time rather than all at once. Maybe it’s a good time to bring in a family member in with them and if something drastic happens, at least the advisor will know who to contact.

Making good notes is also crucial, she said, so you can chart how decision-making is declining. Tell-tale signs include if the client keeps repeating things, if they are withdrawing large sums without reasonable explanation or, on the flipside, if they start hording cash in their bank account. “The advisor then has to make the decision that it’s time to call appointed family members.”

If the advisor’s firm is supportive, talking to the head office or someone they can bounce ideas off can help them come to a decision about the state of the client. Van Cauwenberghe said: “At IG we have seniors and vulnerable persons e-mail box that advisors are supposed to contact when they are concerned about health of financial abuse.

“If you are talking to someone from head office or compliance, they’ve probably seen this a lot more than any one individual has so they know what looks suspicious and what doesn’t.  Always try to get a second opinion from someone in your office that has more experience.

“It’s not necessarily going to be a black and white thing. It’s something an advisor has to make a judgement call about and say, I no longer feel comfortable taking instructions from this person.”

The Canadian Securities Administrators (CSA) has also recognized the seriousness of the problem and on Friday published a notice that outlines suggested practices registered firms can consider when engaging with older or vulnerable clients.

 “We’ve heard that registrants are looking for guidance on how to address the issues and changing needs of older or vulnerable clients,” said Louis Morisset, CSA chair and president and chief executive officer of the Autorité des marchés financiers.

“Registrants could be one of the first to recognize the challenges faced by older or vulnerable clients, including potential financial exploitation or diminished mental capacity. This notice outlines suggested practices that firms and representatives can use to address the individual needs of their clients with the objective of protecting them from potential financial harm.”

The notice includes suggestions as to how registrants can identify and respond to situations involving financial exploitation and diminished mental capacity. It also reminds firms of their know-your-client and suitability obligations, and discusses specific practices they can consider when assessing their policies and procedures in areas such as: account supervision; complaint handling; handling of powers of attorney and limited trading authorizations; communicating with older or vulnerable clients; reporting and escalating of issues; and identifying trusted contact persons.

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