The First Signs Of Trouble
Unfortunately, the first signs of cognitive trouble are typically hard to detect, said Carson Group’s Wood. “It usually starts with memory slips about something the person absolutely would have known normally, which most people laugh at and dismiss as ‘old age,’” she said. “This is the beginning of where firms should begin to take note. Yes, everyone has days where they are cloudy, but with cognitive decline, these days will become the normal.”

What happens next may depend on the size of the firm and how closeknit the team is.

“One of the first things a person should do is contact the firm’s compliance and supervision department,” said Wood, “or reach out to their custodian for guidance on the established polices. … Any time something seems out of ordinary, the firm’s oversight procedures should kick in to limit the risk for clients.”

Three Safeguards
To be sure, firms should have safeguards and procedures in place. Scott Matasar, a managing partner at Matasar Jacobs, a legal practice in Cleveland that specializes in representing broker-dealers, life insurance carriers, and other financial institutions, recommended three policy measures.

First, institute a mandatory retirement age for advisors “with a mechanism that triggers the sale of their book of business either to the firm or to one or more designated advisors at the firm,” he said.

Second, require periodic cognitive testing after a certain age, he said.

“The third is to impress upon advisors to enter into contingency succession agreements with one or more advisors in their office, triggered by both death and permanent disability—with the definition of ‘permanent disability’ to include cognitive decline,” he continued.

These three policies should be implemented across-the-board for all advisors, said Matasar, particularly when they reach a certain age. “While firms have implemented detailed procedures in recent years about how to address clients showing signs of cognitive decline,” he said, “advisors with those issues haven’t gotten nearly the same level of attention.”

A Team Approach
In addition, Matasar suggested encouraging advisors to work as a team. Even if they manage their own roster of client accounts, he said, it’s a good idea to have advisors meet with other team members every few weeks.

“This will allow younger members to be aware of changes in their colleagues’ cognitive abilities,” he said. “Firms need … a culture of openness where those younger advisors, if they see a problem, feel comfortable reporting it to local management without fear of retribution.”

Matasar added that it might be prudent to check with the advisor’s spouse to see if any red flags have been detected at home, too. Spouses are often the first to catch signals of encroaching cognitive decline.

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