With age comes wisdom—especially in the realm of investing and providing financial advice. Advisors who have been in the business for many decades bring a tremendous contribution of perspective to any client relationship. Indeed, many of our nation's most celebrated financial wizards have long since passed the traditional age of retirement, and yet are still outperforming many of their younger peers.

But what if those senior advisors begin to show signs of mental impairment—to the point at which they can no longer appropriately service their clients and safeguard their best interests? With an American being diagnosed with Alzheimer's every 67 seconds, leading to 1 in 9 Americans 65 or older living with this disease, dementia and diminished mental capacity has become one of the fastest-growing causes of death over the last 10 years in individuals 65 or older. 

While much has been written about the challenges of dealing with aging clients whose mental faculties have become compromised (Cerulli Associates states that on average every advisor has 7 clients with Alzheimer's), we are just beginning to create a body of knowledge that deals with the concerns and procedures for intervening when an advisor is no longer capable of fulfilling his or her professional duties.

At a special conference roundtable event convened as part of the annual National Conference for Triad Advisors, the hybrid advisor-focused independent broker-dealer, in Boca Raton, Fla., a panel of industry experts, including seasoned independent advisors and broker-dealer leaders, discussed the key considerations to take into account for advisors facing mental impairment or dementia—and how to prevent this from becoming a business problem before it ever arises.

Some Key Considerations

As the diminution of an advisor’s abilities becomes manifest, there are several key considerations to take into account. These include:

·       Legal liabilities. This is a topic rife with complications. Who is responsible if it becomes evident that an advisor is impaired? Is it the client’s responsibility to monitor the relationship? The advisor's staff's or family's? The broker-dealer’s? Who is on the front line of accountability and what are the potential dangers?  

·       The viability of the business. When an advisor has worked a lifetime to build a practice, if it becomes apparent that he cannot continue to ply his trade as before—or if it just begins to hint in that direction—one of the key concerns is ensuring that the business maintains continuity. A good practice holds significant value, and an effective succession plan needs to be implemented in a manner that preserves value for the advisor and for those others who may be dependent upon him, including colleagues and family.

·       The advisor’s dignity and self-respect. The last thing one would want to do to an advisor who begins to demonstrate impairment is to summarily shut him down. That can backfire, and make the advisor dig in his heels and refuse to recognize his own diminishing skills.

Preventing A Problem Before It Arises