When older clients show any signs of cognitive decline, or potential cognitive decline, advisors must take concrete steps, including revising investment policy statements, according to Norman Boone.

“It is obviously really hard when people are losing their faculties,” Boone says.

He is a creator of IPS Advisor Pro, and an expert on investment policy statements, as well as a founder of Mosaic Financial Partners in San Francisco, which has more than $600 million in assets under management.


At the first sign of a client having trouble making decisions, Boone believes advisors should revise their IPS to reflect that the client will no longer be the only one making investment decisions.

“These need to be written so everybody shares the same expectations and investment goals. They need to state what you are going to invest in, how frequently an advisor is going to view a client’s statements, whether an advisor is going to take discretion, what is the client’s risk tolerance and how that is going to be reflected in asset allocations,” Boone says.

In addition, each IPS needs “open enough architecture,” to allow for a description of “who the clients are, their backgrounds and their general state of clarity of thinking,” Boone says.


Although an IPS does not represent “a contract per se” between a client, or client’s family and an advisor, it does reflect a common understanding. “You ought to treat it as a contract,” he says.

That means “if you are doubting if a client has an understanding what you are saying,” you should identify that as the situation in the IPS. His preference would be to identify also a spouse or adult child as a co-decision maker in the IPS. He also recommends advisors revise all other documents they have stating agreements between themselves and the clients to reflect any concerns about cognitive decline.


But Dusty Wallace has a somewhat different approach. “We tailor the verbiage for every client,” she says of her firm’s IPSs. Wallace is the director of financial planning and the compliance officer at Lee Financial in Dallas, Texas, which has $1.1 billion in assets. Her firm typically, however, does not opt for “hugely detailed IPSs,” she says. Rather, “We try and keep it more general.” And therefore she has not ever added to an IPS anything regarding a client’s cognitive decline.

But that doesn’t mean Wallace’s firm is not on top of the issue. Should clients show signs of cognitive decline, her firm’s advisors would undoubtedly be taking steps to clarify who should be helping them make decisions, Wallace says.

Miriam Rozen is a reporter for Texas Lawyer who writes about financial planning and services.

This story is part of a 30-day series on better serving seniors.

Miriam Rozen

Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.