Editor’s note: This is the second in a two-part series focused on helping advisors understand what cognitive impairment is and how to identify and plan for the various degrees of this pervasive disease in their clients.
In Part 1 of this article, we introduced the importance of recognizing cognitive impairment in clients and what to look for in determining whether a client is exhibiting behavior consistent with this disease. In Part 2, we provide some practical tools to help prepare clients and their families before the disease possibly develops.
As with all matters of financial planning, the most effective planning is often done far in advance and considers both anticipated and unexpected events. So it goes for dementia, especially because of the urgency required in detecting the early warning signs before a crisis ensues.
When advisors suspect their clients are suffering from the early stages of Alzheimer’s, they may be reluctant to address it for fear of insulting them or otherwise jeopardizing their professional relationships with them. Yet this fear simply must be overcome if an advisor believes a client is at risk of inflicting self-harm, financial or otherwise.
An effective way to address it is to discuss the possibility of the disease with clients long before there are any warning signs. A straightforward discussion helps, but talking about it may not be enough. When possible, the client and advisor should reach an understanding about how they will deal with it. For instance, they could address the legal concerns about client privacy by using an incapacity contact form.
Such a form would establish certain key principles:
• That the advisor’s first priority is to discuss and resolve concerns about capacity with the client directly but that circumstances may arise in which the client’s financial interests are potentially at risk without intervention; and
• That to prevent problems, the client authorizes the advisor to contact third parties with any concerns about the client’s capacity to manage his or her financial affairs.
A properly drafted incapacity contact form should not add any additional legal burdens or obligations for the advisor. Its sole purpose is to provide the advisor with all of the necessary tools to protect and advocate for the client’s best interests.