IG estate planning VP explains key strategies to successfully navigate a growing challenge as clients age
The VP of Tax and Estate planning at IG Wealth Management believes advisors need to take proactive steps to prepare for the eventuality that their clients may slip into dementia.
Christine Van Cauwenberghe told WP that dementia among clients is an ongoing and growing problem for advisors, their clients, and their clients’ families. She said that advisors need to take proactive, gradual steps to get ahead of this problem in the tragic eventuality that dementia begins to arise.
Despite an ongoing stigma around the problem of diminished decision making capacity, Van Cauwenberghe says it’s the advisor’s role to start conversations around the issue to protect their client and ensure their interests are cared for whatever the eventuality. She says it’s not an issue advisors can skirt. If they haven’t already, advisors are going to face the challenge of dementia soon.
“When I started with IG, almost 20 years ago, it would be a rare day when I would get questions about vulnerable persons and clients with dementia,” Van Cauwenberghe says. “Now we have a dedicated mailbox and dedicated staff to that issue. If there are advisors out there who haven't dealt with the issue, they need to brace themselves because I'm sure they will have to deal with that issue in the not too distant future.”
Van Cauwenberghe said it’s crucial for advisors to understand that dementia is a sensitive and gradual issue. Decision making capacity is not binary, and not governed by an on-off switch. Because it manifests in gradual changes, she said it’s important for advisors to watch their clients closely for signs of gradually diminishing capacity, those could be late or missed appointments, repeating questions, forgetting simple things, or agonizing longer over decisions. Advisors can use their existing relationships with clients as a baseline to notice any strange behaviour that could indicate dementia. As well, Van Cauwenberghe said that typically social graces and small talk are the last things to go. More complex conversations around investment decisions, though, can test a client’s capacity and show emerging cracks the way a conversation at a cocktail party might not.
Once the client has shown enough early signs to raise concern, Van Cauwenberghe said advisors need to start gently broaching the conversation around mechanisms like a power of attorney and emergency contacts as well as beginning to ratchet down risk tolerance in their portfolio to avoid dramatic changes in the portfolio that could test a client’s decision making capacity. She said that hopefully those early decisions will protect the client should the onset of dementia start to come more rapidly.
Van Cauwenberghe said that for all the proactive moves an advisor can make, they should not expect the onset of dementia to come without contention and serious difficulty. As the client’s family gets more involved in their life and portfolio decisions, the interests of the client must be an advisor’s first priority.
“The first thing I would always emphasize is the client is the client,” she said. “Although other individuals may be added with power of attorney your primary relationship is always with the with the client and you need to keep their best interests in mind. I think that to certain degree it is healthy if you meet the family members and know who to contact in case of emergency, but you always have to keep privacy and confidentiality rules top of mind.
“Hopefully, if the relationship evolves gradually and you get to meet the attorney and in an environment that's not contentious and not difficult, you will develop a relationship and maybe joint decisions will be made between the client and the attorney in a gradual process. But keep in mind again, that it's always the best decisions of the client that you need to keep in mind, not what's in the best interests of the attorney, and this is where the financial abuse discussion often will start to come into the picture.”
Financial abuse is a serious risk for clients with dementia and Van Cauwenberghe said it can often come from family members who have any number of justifications for their actions. She said that most major financial institutions have financial abuse protocols in place and advisors should study those to ensure their client is protected. For example, Van Cauwenberghe said that at IG they would not allow someone with power of attorney to designate themselves as a sole or joint owner of assets or add or change beneficiary designations. Often times those attorneys believe they’re acting in the client’s best interests, too, and won’t realize it’s financial abuse until that’s explained to them.
Dementia adds layers of complexity to the already complex process of estate planning and management. Van Cauwenberghe said that in helping with estate planning, advisors should develop networks of accountants, insurance specialists, and lawyers they can refer a client to, to assist with any estate planning needs. She recommended engaging with the local branch of the Society of Trusts and Estate Practitioners (STEP) which holds multiple meetings a year. Developing those networks means each piece of the estate planning puzzle can work to keep the others honest and the client well served, whatever the challenges they face.
The priority for Van Cauwenberghe when dealing with clients with dementia must be client service. She said that even simple changes like holding meetings in the morning when the client feels more alert can preserve their decision-making capacity.
“Decision-making capacity is very time and issue specific,” she said. “As clients get older, you have to treat them with respect and try and include them as much as you can, but their decision-making capacity may alter over time. Someone who was used to making very complex decisions, may no longer be capable of making complex decisions. But that doesn't mean they can't make any decisions. Advisors have to approach it as a as a gradual thing but at least, usually, they have time to prepare.”