Advising clients with early signs of dementia

Anthony Messina, president and head of wealth at Guardian Capital, has had longtime clients at his firm ask the same question repeatedly or forget that certain transactions took place, which are common signs of dementia.

“You may get to a point where you’re thinking, ‘OK, something’s not feeling right here,’” Messina said.

As client bases age, it’s a scenario that more advisors will face. Experts recommend approaching clients with dementia with sensitivity, advising them to set up a power of attorney (POA) with the right lawyer, watching for signs of financial abuse and proactive planning before clients turn 50.

Early onset dementia is diagnosed before the age of 65 and can be diagnosed as early as in a patient’s 30s or 40s, said Neela White, a portfolio manager with Blue Wing Advisory Group of Raymond James and a certified dementia care provider. Early signs include challenges with language, behaviour and physical ability, depending on the type.

Late onset dementia, diagnosed at age 65 and up, typically shows up with memory issues, added White, who also has an educational background in gerontology. “Once it’s diagnosed, it disrupts their career. … It’s not as if you can take something and avoid it. You will die.”

Speaking with sensitivity, taking notes

If an advisor perceives a client to have diminishing mental capacity, they can speak with the client’s spouse or lawyer individually before addressing it with the client, Messina said. Then, advisors should speak with their firm’s legal and compliance department for advice.

To protect themselves, advisors should note down any observed decline in a client’s understanding of financial conversations or transactions, as well as forgetfulness, White said. The client may need more frequent meetings, checklists and follow-up emails to remember what was discussed.

“Note-taking is key. This is when you really have to know your client and know your product,” White added. If the client suddenly wants to buy high-risk products that don’t fit their profile, advisors can say no and document why it’s not appropriate.

Set up POA carefully

While the client still maintains mental capacity, ensure they have a will, a POA for care and POA for property, White said. Meet the POAs and the executor and get to know who they are.

If you know the client’s lawyer, call them to talk about a POA as they may already have one, Messina said.

A POA for property should be customized to the client’s needs, said Ron Malis, an advisor with Reegan Financial, who exclusively serves clients with disabilities. Lawyers who offer to draw up a POA and will for a flat fee often won’t meet a client’s needs.

“Early stages of dementia are kind of like the stock market. One moment they could be completely lucid, and in another moment, they could be quite the opposite,” Malis said. The POA should clearly state how it defines when the client is incapacitated.

When picking a POA for property, the client should consider the person’s financial knowledge as well as their trustworthiness, Malis added. “Your 25-year-old son or daughter; you trust them, you love them, … but what do they know about managing money?”

On the flip side, the client can also explicitly name who they don’t want involved in their affairs, especially for a POA for care.

For example, if two of a client’s three children have a POA for care and want to “pull the plug” but the third child without a POA threatens to sue the hospital, doctors might hesitate to act, Malis said. “There’s so much grey area for somebody who’s not named an attorney for care that they can still really make a mess of things.”

Be wary of financial abuse

People with dementia are ripe for financial abuse. When a client comes for a meeting, ask how they’re doing. Subtle signs, such as the clients’ clothes not being clean or noticeable weight loss, could indicate an issue with a caretaker, White said.

White’s mother had dementia and her personal support worker would complain about money issues to guilt her into giving the caretaker cash, she recalled. “That’s undue influence. If I don’t give you cash, are you still going to take care of me?”

Advisors can match withdrawals with receipts for care to ensure that there hasn’t been financial abuse, White said. If the client is requesting a withdrawal that doesn’t match their normal spending patterns or previous conversations, they could be a victim of a scam, and advisors should call the POA (if invoked) or spouse (in case of a joint account) to confirm transaction details.

Financial implications

If a client is diagnosed with dementia in their peak earning years in their 50s, it could be disruptive to their financial plan, White said. The client may need to cut back on discretionary expenses, concentrate on capital conservation with a shorter time in the workforce and consider the long wait to get into a long-term care facility.

Even if the prognosis says the client will die in 10 years, care costs can be much higher in the later years, White warns.

But these are reactive strategies. Advisors should remind clients to consider  critical illness insurance before age 50 as part of their holistic plan, Malis said. While the client may feel like it’s an expense without guaranteed return, critical illness policies can come with a return on premium rider that makes it easier to swallow.

“It’s going to be a huge help,” Malis added. “Don’t expect our public health-care system to pay for everything.”