Dementia: The Growing Retirement Risk

David Gutzke

  • David Gutzke couldn’t help noticing the changes. His longtime client, Ron Dudley, an astute, 62-year-old entrepreneur and an admired figure in his community, suddenly couldn’t remember things anymore. At first, he started to miss details of important meetings and conversations but soon couldn’t recall even the names of family members.

“It came on fairly quickly,” Gutzke, a wealth management advisor in the high-net-worth unit of Minneapolis-based U.S. Bank, says of his once-sharp client. “He just wasn’t remembering things and also not using the best judgment.”

The onset of Alzheimer’s hit the family hard, but they pulled together and got their arms around it as quickly as they could. Still, Gutzke says, there were flare-ups with the children initially arguing about who should help the beloved family patriarch with financial   and health care decisions.

“Initially a diagnosis like this can be almost debilitating for some family members and often they need to work through the shock and adjust for the new normal,” Gutzke says.

No one wants to talk about dementia, but it’s a conversation many people—and their advisors—need to have if they want to be fully prepared for the risks of retirement. Individuals who haven’t thought through what might await them not only face the threat of throwing their families into chaos but also risk putting their assets on the line by making themselves vulnerable to con artists and other financial predators.

Worse, failing to plan for cognitive decline can lead to what many see as the nightmarish scenario of guardianship, with the individual’s financial matters and health care directed by a court-appointed guardian or conservator.


For advisors, the repercussions can be immense. Not helping clients plan for possible cognitive impairment can lead to legal dilemmas that can land advisors and their banks in trouble. Privacy issues, conflicting principles and a host of other concerns can easily hobble and paralyze advisors, leaving them unable to act on their clients’ behalf.

As the nation’s 76 million baby boomers continue to retire, advisors can expect to encounter more clients with memory issues.

An estimated 10 million Americans have dementia or cognitive impairment with 2 million new cases reported every year, according to research by David Laibson, a professor of economics at Harvard University. More than 40% over the age of 80 have dementia and almost 70% are cognitively impaired, researchers say.

Banks are certainly seeing the effects of this issue. Wells Fargo, for instance, has seen a tripling in the number of calls it fields from advisors concerned that their clients are either cognitively impaired or being abused.

In 2010, the bank received about 30 calls a month, but now it’s up to about 100, says Ron Long, head of the firm’s Regulatory Affairs unit and the recently launched Elder Client Initiatives group.

The new seven-member group assesses reports as they come in, guiding advisors on what to do, including whether the reports need to be filed with the local Adult Protective Services office in cases where financial abuse is suspected. The team, which is based in St. Louis, includes a lawyer who manages five elder care associates and one intern.

Advisors working with clients showing early signs of cognitive impairment are “probably in one of the worst places they can be,” says Long. They face legal risks at every turn and often find themselves in damned-if-I-do-and-damned-if-I-don’t situations.

Suppose, he says, that a client with signs of impairment calls an advisor and asks him to sell all his IBM shares. If the client says, ‘Sell all of my IBM. Everything I’m hearing from Silicon Valley is that mainframe computers are not going to be useful anymore,’ the reason for selling at least is rational, Long explains. If, on the other hand, the client says, ‘Sell all my IBM. I heard the Martians are landing tomorrow and they want to take me with them,’ the reasoning isn’t rational and the advisor should heed the clear red flag.

In either case, the decision to sell IBM would be difficult for any advisor to make. If the advisor sells the shares and the transaction proves disastrous, the advisor and his bank could be held liable. If, on the other hand, the advisor doesn’t sell the shares, and the transaction, had it been made, would have been beneficial to the client, the advisor and the bank could also potentially be liable.

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Comments (4)
Quote: "Wells Fargo, for instance, has seen a tripling in the number of calls it fields from advisors concerned that their clients are either cognitively impaired or being abused."

I blame Wells Fargo (and other banks) for making the problem worse. I'm aware of situations where disabled elderly customers wanted a family member or caregiver to have very strictly limited powers to withdraw small amounts from a checking account on a regular basis. Wells Fargo and other banks refused: their only option was the bank's own POA form, giving the recipient complete control over the client's accounts INCLUDING WITHDRAWAL OF THE ENTIRE BALANCE (as their form dramatically warns in a very prominent place.)

That's absurd. If this is how Wells Fargo is advising elderly account holders, THEY are undoubtedly responsible for many of the fraud events they worry about.

There should be easy ways for elderly account holders to set up strictly limited powers at their banks for their relatives or caregivers, which can be easily monitored with alarms set should the withdrawal limits be exceeded. Banks should not be forcing their customers into unconditional POAs that are catnip to an abusive recipient of those powers.
Posted by Eric B | Monday, September 01 2014 at 1:01PM ET
My mother has been fighting this disease for 10 years ... First, those signs that you all mention, and a gradual deterioration from there, then the next real step up (down) was the loss of short term memory (swearing that she hadn't been to the store shopping with my wife that afternoon, at dinner one evening).

Having been her caregiver while taking a sabbatical from my advisory practice to finish law school (not un-related) and watching this progression, I have a couple of take-aways:

Having the benefit of hindsight, it was creeping in LONG before anybody noticed (or did any more than write it off as "getting older.") ... Once her neurologist, however, told me that the combination of Aricept and Namenda, had, in his experience, been the biggest (maybe only) REAL "results getting" development the last 20 years ... AND seeing her deterioration simply stop in it's tracks... (still, four years later, she's still in what the doc calls a real holding pattern, and she HAD BEEN going down fast) ... makes me wonder what would have happened had we started, recognized, acted ... earlier.

Second, the advent of Luminosity (I have no association)and other brain training sites, games, exercises - which have proliferated after neuroscience's discovery (helped by newer technology such a MRI) that our brains are much more elastic (able, actually, to GROW - even at advanced ages) than medical science once believed, have their part to play as well.

(I know that, as I have pushed my old brain at age 56 through law school, I have come up, exponentially, in brain brightness scores)

My mother's refusal to "go gentle into that good nigh and her "rage against the dying of the light," also, has payed a part, I believe, in her ability to have a life of dignity, when others in her path have long gone.

Now, back to it's applicability to our profession. (If we are financial planners, and not JUST investment people), I believe that our responsibility is not to farm this out ... but to seek first to understand, read, learn, and don't oversimplify.

AND, (in line with Bob Veres' article in FP's Aug 2014 FP), we should look at this as an opportunity, ... as FINANCIAL PLANNERS, ... to be SO much more than the personal finance magazines of the 80's and 90's, the discount broker's of the 90's and 2000's and the SUPPOSED threat of yet another "same thing works for everybody of a certain class," theat, the robo-advisers.

Awareness/recognition won't be enough, however. We need to (borrowing again from another of my heroes, Dr Covey) seek first to understand, TRULY, to understand, if we want to add the kind of value that we as financial planners are already uniquely positioned to provide.

Posted by Lane M | Monday, August 25 2014 at 5:32PM ET
I began practicing financial planning in 1979. Over the ensuing 35 years, I witnessed a wide variety of changes in the profession. Change in the cognitive abilities of the aging population is a growing concern for planners, regulators, and family members.
I am currently a PhD candidate in personal financial planning at the Institute of Personal Financial Planning at Kansas State University. The working title of my dissertation is "The longitudinal association of cognitive ability of the assets of elder couples." I'm using the Health and Retirement Survey conducted biannually by the University of Michigan as the basis of my research. In the last few years both the industry and academic journals and exploded with papers relating to aspects of cognitive ability. I expect to cite this addition as part of my literature review. My preliminary results indicated that assets are affected in different ways by the education, changes in memory, and changes in mental status.
I expect that is the not too distant future assessment of cognitive ability will be as routine as determining risk tolerance. It may come to the point that assessment will be conducted by trained professionals using telephone interviews. Te results of such assessment s may affect to amounts and categories of alternatives that may be deemed suitable for a particular investor.
Posted by Fred F | Monday, August 25 2014 at 1:10PM ET
RE: It's very difficult for advisors and trust officers to be placed in situations of having to play doctor, notes George Pennock, a regional fiduciary officer for Bank of the West. "We're not in that business," he says. "It's hard for us to diagnose."

Fuzziness surrounding different standards of capacity makes the issue even more complicated, according to Pennock. The standard of capacity to contract with others, for example, is different than the standard for testamentary capacity, Pennock explains. "It's just not easy to figure out where exactly the line is when someone has full capabilities and when they don't,"
Well, the problem is a lot worse than described. The American consumer has a financial literacy score of F, It is F after they leave high school and it doesn't change that much- if at all through their lifetime. It is true that some bright people (college??) do better on tests, but there is no correlation via education, (See Annamaria Lusardi and others). What is missing here is that the elderly (say 65) start to lose whatever financial acumen they may have had by about 2% per year. Additionally, and perhaps more of an issue is that their PERCEPTION of ability goes up by 2% each year. Not simply a conundrum but an absolutely critical requirement on the part of advisers (who do not know much anyway and, per current continuing ed, never will) is how does one know if any of the financial responses by such elderly have validity? Since it is not addressed in this article- which is far more descriptive of dementia et al than most- it is not going to be argued anyplace. These figures are a game changer since how is an industry supposed to validate just about any transaction when the independent researchers show a minimal understanding of what they are doing no matter the replies or the notes that are taken.
This is not dementia per se nor alzheimers. It is the simple process of aging that is not being addressed for this industry.
Posted by Errold M | Monday, August 25 2014 at 11:52AM ET
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