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Dementia: How to protect elderly clients

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We often think that getting older and getting forgetful go together. Sometimes they do, but memory loss should raise a red flag when it comes to your aging clients and their investments.

Losing capacity for financial decisions is something advisors need to be ready for, as it is likely to affect a huge part of our population.

By 2030, there will be 72.1 million people in the U.S. over age 65. and 7.7 million of them will have Alzheimer's Disease, according to recent data from the Census Bureau and the Alzheimer's Association. This directly translates to a large number of impaired clients making or attempting to make financial transactions and decisions. Some of those transactions could be with you. Are you prepared?


Financial institutions, organizations and banks need to take preventive steps to avoid financial losses and the exploitation of their elderly clients. Institutions need to explicitly plan for the possibility of the diminished financial capacity of their clients.

It’s not simply a matter of escalating an issue to compliance when a client is behaving oddly. The notion that privacy concerns prevent advisors entirely from doing anything unless the client gives permission must be reconsidered. A client who is impaired for decision-making may not be willing or able to give permission for you to discuss a problem with family until it is too late. Thus, getting permission needs to be a proactive mandate for your firm.

Privacy does not have to be a problem if you and your organization plan for the possibility of diminished capacity as a part of all investment transactions. Firms must obtain a special authorization to contact a designated person on behalf of your client when certain criteria are met and must develop an agreed-upon plan of action for when the criteria that demonstrate diminished capacity are identified.

This, of course, means thinking through the criteria that would trigger the use of the special authorization. It will also take collaboration among all the players in institutions, so that policy development is uniform, regulation-compliant, and fair to the aging person who may be developing impairment.


Most importantly, a secure path of communication and action for the institution needs to be in place. No one on your staff with a questionable aging client should be left wondering: Should I escalate this to compliance now, or does it take more? Do I have the authority to contact a family member, or does that violate my client's privacy and the laws about privacy? What steps should I take now to protect myself?

Clients with memory loss are likely to become impaired when it comes to making financial decisions. Don’t lose the assets under your management because your aging investor can't figure out what you are saying and can't approve what you need to do to protect him from disaster. With preparation and planning advisors can help prevent clients’ memory loss from resulting in financial loss.

Carolyn L. Rosenblatt is an RN, an attorney and a consultant on aging issues at AgingInvestor.com and AgingParents.com.

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