In a Research magazine cover story published last summer, author Michael Finke quoted a man who bluntly asked how to invest in his old age: "What do I do when I get stupid?"
An inability to understand money and credit is one of the first stages of dementia, according to research by Daniel Marson, a neuropsychologist at the University of Alabama, Birmingham, published in the American Journal of Geriatric Psychiatry. This means financial advisors may be the first to see signs of mental decline in older clients. In fact, 84% of advisors in a 2009 Fidelity survey thought they had clients with declining mental capacity and 96% said they did not feel prepared to deal with it.
Mary Malgoire, founder of The Family Firm, an advisory firm in Bethesda, Md., has given this issue a great deal of thought. In an excellent workbook, "Financial Tips for Adult Children of Elderly Parents," she offers guidelines not just for children of aging parents, but also for advisors, CPAs, eldercare attorneys and other professionals. To find out more about how to handle signs of dementia, I interviewed Malgoire in March.
Olivia Mellan: How do you start the conversation if you believe a client is failing?
Mary Malgoire: If the older person's adult child is also your client, it's relatively easy to ask, "How are Mom and Dad doing?" or "How's your Dad doing?" But this is a landscape that the child has never walked through before. So at the same time, you might want to ask some questions to tip them off: "Is Dad keeping up with the bills?" or "When you visit, does the fridge have enough food in it?" Eating well is a particularly important consideration when a parent has been widowed.
It's important for the child to be observant. "Has Dad had any trouble driving?" "Are they finding places they're driving to OK?" One of the things that tipped us off in two different cases was that elderly clients were having trouble getting to our office, when they had no trouble in the past.
When you're addressing this subject with an elderly client, it's a little bit more difficult. You start out with easy questions like "Did you have any trouble getting here today? How was the traffic?" If they trust you and have a good relationship with you, they might say, "I took a bunch of wrong turns and got lost." Then you might ask, "How are you doing with staying on top of the bills?" This can be a casual conversation; you don't want it to look like item one on the agenda is "Check in about how they're aging."
OM: So you think advisors should be proactive if they notice that a client is having problems?
MM: Diagnosing cognitive impairment isn't our job, but we can explore areas of concern to help a client function and get the help and support they need.
For example, we had a woman in her late 80s—a widow whom we'd worked with for more than 10 years and knew very well. Over the course of eight months or a year, we noticed she had trouble finding our office. She couldn't remember getting to places, and organizing events was becoming difficult. We asked if we could speak with one of her daughters, who lived far away. We said to the daughter, "We think it's time for you to move your mother closer to you; she can't live alone any more." The daughters collaborated and moved the mother into a good assisted-living situation closer to one of them, and it worked out fine.
OM: Is there anything you do at the beginning of a relationship to prepare for a possible mental decline later on?
MM: We do have a form that we sit down and fill out at the start of a relationship. I borrowed the idea from a NAPFA member, and I think it's a best practice that advisors should adopt.
We tell the new client, "We routinely ask some questions as part of getting acquainted, so I don't want you to feel offended by them." Then we ask, "Who pays the bills? Are you staying on top of the bills?" For widows or widowers, we might ask, "Do you have friends you go out with a lot?" With older parents we ask, "Do you see your kids often?"
