Advisors know the many challenges that come up when their clients live longer. Yet it might seem outside of their lane to deal with one of the most painful problems, namely the possibility that an aging client will suffer diminished intellectual capability.

It’s surely a difficult subject, but not one that’s outside an advisor’s purview. If you want to help clients prepare for the future, experts say you can’t ignore the unpleasant possibility of their age-related cognitive decline.

Be Prepared
“Financial advisors must be prepared for the challenges presented by an aging client base,” says Bill McCollum, senior vice president and wealth advisor at Eagle Financial, a Wealthcare company in Shreveport, La. “The solution is likely non-financial.”

Experts say you can get ahead of cognitive decline problems by bringing them up early. Matt Pastor, an advisor at Johnson Brunetti in Wethersfield, Conn., says his firm has procedures in place so it can discuss health and cognitive declines with new clients. “[We] continue to discuss it throughout the relationship,” he adds. “Part of retirement planning is planning for the ‘what if’ scenarios.”

A client’s diminished capacity should not be handled ad hoc, says Steve Parrish, a St. Augustine, Fla.-based co-director of the American College of Financial Services’ Center for Retirement Income. “There are a number of tools available that can be executed in advance, while the client still has capacity. If that client experiences diminished capacity later, these tools can help manage the situation.”

The best time to talk about the subject is before it becomes a concern, says Erin Wood, vice president of financial planning and advanced solutions at the Carson Group in Omaha, Neb. She suggests developing a “cognitive decline plan” that includes action steps when the time comes to deal with the client’s diminished intellectual capacity.

“The worst situation is to have no plan at all,” Wood says.

Powers Of Attorney
One vital part of such plans is documenting powers of attorney. There are different types.

A medical power of attorney lets a trusted confidant make health-related decisions for a client when the client is unable to. A financial power of attorney, which can name the same or a different person, works in similar ways but typically goes into greater detail about exactly which types of financial decisions can and cannot be made by the designated person. The power to pay bills, for instance, is standard. The power to donate to a charity might not be. The rules vary by state.

Powers of attorney can be “durable,” meaning they can go into effect immediately and in perpetuity, or “springing,” in which case they only become effective after something happens, for instance if a client becomes incapacitated.

In addition, some advisors want clients to appoint someone to accept their Social Security payments. Social Security doesn’t typically accept powers of attorney, but clients can designate in advance up to three people to handle their benefit payments if the need arises. Otherwise, the federal agency will appoint someone.

Trusted Contacts
In addition, clients should name a trusted contact, who might or might not be the person with powers of attorney. “Advisors need to have a trusted contact for all older clients,” says Tom Salvino, CEO of Performance Wealth in Hinsdale, Ill. “That person knows and cares about the client.”

The Financial Industry Regulatory Authority, in fact, requires firms to make “a reasonable effort” to obtain contact information for a trusted person for every noninstitutional client. Rule 4512 describes the circumstances under which a client’s confidential information can be shared with this contact.

Blaine Butcher of Wealthcare Advisory Partners in Scappoose, Ore., recommends checking in with all trusted contacts and designees annually “to remind them of the responsibilities of their role.”

Estate Planning
For some advisors, these preparations are simply part of estate planning. “Ensuring the currency of our clients’ estate documents is a priority,” says Corey Briggs, wealth manager at Plaza Advisory Group in St. Louis, which is affiliated with Steward Partners.

He says estate planning should include wills, trusts, advance medical directives, beneficiary designations, powers of attorney, and possibly even the early designation of a preferred legal guardian. “This proactive approach safeguards against potential challenges,” he says.

Clients should have their documents in order regardless of their age, says Stephanie Forrester, assistant vice president and advisor at Wealthspire in Madison, Wis. Having them, and updating them periodically, “establishes some safety nets,” she says.

An Uncomfortable Topic
To be sure, discussing mental deterioration can be uncomfortable. “Parents can be extremely sensitive to comments from their children about their possible cognitive decline,” says Claire Mork, director of financial planning at Edelman Financial Engines in Westminster, Colo.

Denial and avoidance are common. But that’s precisely where an advisor can help. “Advisors can act as a neutral nonfamily member that can serve as the intermediary,” she says.

At other times, however, the subject might arise naturally—such as when advisors first detect trouble. “Advisors are usually in regular contact with their clients and often notice subtle changes in behavior,” says Taylor Custis, managing director and trust counsel at Fiduciary Trust International in Atlanta. Family members, she says, often miss the early symptoms—or are unwilling to see them.

When broached, the discussion should be calm and compassionate. You’re offering to help. “Usually clients will be happy to have the support,” Custis says.

Some firms have resources in place to help advisors with these conversations. Barbara Archer, a partner at Hightower Wealth Advisors in St. Louis, says her firm “gives advisors access to articles, webinars, and podcasts that they can share with clients about identifying potential signs of cognitive decline.” Such tools can introduce the topic “in advance of a possible need,” she says.

Don’t Play Psychologist
But remember: Advisors aren’t mental health experts.

“Be cautious about making a diagnosis without the medical credentials,” says Kelly Mould, a wealth fiduciary advisor at Johnson Financial Group in Racine, Wis. “Mere old age, eccentricity, or physical disability are insufficient for a finding of incapacity.”

Robb Armstrong, a senior trust officer at Arden Trust Company in West Palm Beach, Fla., says the typical symptoms of cognitive decline can include “forgetfulness, repeating oneself, getting lost in familiar places, and difficulty comprehending things that the client never struggled with in the past.”

Of course, the warning signs might be more serious, such as “frequent driving accidents, medication errors, and impulsive behavior,” says Mallon FitzPatrick, the head of wealth planning at Robertson Stephens in New York. “These types of changes can translate into erratic and reckless financial decisions.”

If your client is suddenly buying or selling large amounts of securities, overpaying credit cards, or making huge financial gifts, FitzPatrick says this is usually a sign that you should act immediately. But you should contact your compliance department before reaching out to the client’s loved ones. It may become necessary to consult legal counsel or a local eldercare agency, FitzPatrick says.

Protecting Older Clients From Scams
At the same time, advisors need to try and protect clients from fraud.

“Because financial exploitation is a huge concern for aging clients, regular review of financial accounts and daily transactions is essential,” says Jaime Eckels, a partner at Plante Moran Financial Advisors in Auburn Hills, Mich. “I personally review withdrawals on my clients’ accounts daily.”

Sometimes she also recommends a credit monitoring service or freezing the client’s credit. “The best tools are your eyes and ears,” says Harriet Chase, a financial planner at Aspen Grove Wealth Management in Belgrade, Mont. “If I notice a normally efficient, organized client suddenly has a messy home and unopened bank statements on the table, those may be signals that things are changing.”