Nearly half of CPA financial planners report seeing a client with dementia for the first time ever in the past year, but only 17% of planners say they have created plans for dealing with client incapacitation, a new report says.
The AICPA’s Personal Financial Planning (PFP) Trends Survey, released today, found that despite increased awareness about the impact of aging on cognitive function, 28% of CPA planners say their clients plan to deal with diminished mental capacity in retirement on a reactionary basis, and 20% are ignoring the issue altogether, the survey found.
“Managing cognitive decline is difficult for the client, their family and the CPA financial planner,” said Susan Tillery, chair of the AICPA’s PFP Executive Committee. “At times such as this, it is essential to be proactive by having a plan in place to deal with the financial demands of long-term care and other medical expenses associated with diminished capacity. By having a plan in place, the family will be able to focus on quality of life and not on managing the financial need.”
The survey found that of those CPA planners who do address client cognition, 92% ensure that powers of attorney and health-care proxies are in place, while 66% arranged for themselves to contact their client’s other professionals and relatives.
Planners in this group also reported obtaining authorization to contact their client’s attorney (44%), moving money to a trust (37%) and automating their client’s annual required minimum distributions from their qualified retirement accounts (34%). Nearly a quarter (23%) had their clients move into a previously selected assisted care facility.
“As the trusted advisor to my clients, I am especially cognizant of mental capacity, and specifically with elderly clients, symptoms of the early signs of dementia,” added Tillery.
Nearly half (48%) of all CPA financial planners reported they had a client exhibit signs of dementia or diminished capacity for the first time in the past year alone.
The survey asked CPA financial planners what types of financial abuse or fraud they’ve seen perpetrated on their elderly clients. They cited phone or internet scams (75%) most frequently, followed by the inability of clients to say "no" to relatives (60%) and identity theft (49%). Additional common scams or abuse included support for non-disabled adult children (43%), credit card theft (30%) and being taken advantage of by an in-home caregiver (26%).
“Everyone is vulnerable to financial abuse and exploitation. However, the elderly are highly susceptible because companionship is an enticing allure for them. This can be due to the disintegration of the traditional nuclear family, death of spouse or friends, and the isolation that accompanies declining health,” Tillery said.
CPAs also reported that the stress and emotional impact of fraud outweighs the actual financial impact. By more than a 4 to 1 margin (68% vs. 16%), CPA financial planners said the emotional impact was substantial compared to minimal. Only 1% said it had no impact. CPA financial planners said that the financial impact of fraud is more likely to be minimal (45%) than substantial (32%).