Practice Strategies
Cognitive Disease Awareness Must Rise Amid Aging Trend - RBC

The wealth management firm says advisors across the industry must give more focus on an issue likely to become more urgent as populations age.
There’s been a great deal of focus lately on inter-generational
wealth transfer and what millennials want. It is easy to lose
sight, perhaps, of how the aging of developed countries’
populations is building a set of problems wealth manager must
confront.
One of the largest challenges is the rising incidence of
cognitive decline associated with diseases such as Alzheimer’s.
And linked to this are the distressing stories of inter-familial
fights over assets where lasting power of attorney powers are
disputed. Only recently, 88-year-old former astronaut Buzz Aldrin
– the second man to walk on the Moon – has been locked in a legal
fight with his family over claims he has dementia. In the UK, use
of lasting powers of attorney has come in for criticism over
alleged misuse. Even where legal fights don’t arise, the issues
around cognitive decline shine a light on how wealth managers
have a duty of care to clients who may have been valuable
customers for years.
The aging of the Baby Boomer generation makes these issues
particularly acute, given that, on some estimates, up to $30
trillion of assets are set to change hands in coming years.
According to the Alzheimer’s Association in the US, 5.7 million
citizens have the disease. And that number isn’t likely to fall
soon.
“The number of people with dementia is going to triple,” Angie
O’Leary, head of wealth planning, RBC
Wealth Management (US), told this publication
recently.
“There are some difficult conversations to have……social media and
other channels are helping to drive conversations. We think
awareness of this is really important,” she continued.
RBC’s US wealth arm has, for example, hosted, sponsored and
worked with organizations such as the Women’s Brain Health
Initiative to help advisors and clients understand the
devastating impact dementia can have on a family’s financial
wellbeing and the importance of planning to mitigate that
impact.
Earlier this year, under new
national standards crafted by FINRA, the investments
regulator, firms are now required to “make reasonable efforts” to
obtain the name and contact information for a trusted contact
person of a client’s account. The rules also give FINRA the power
to place a temporary hold on disbursement of funds or securities
if there is a “reasonable belief of financial exploitation”, and
to notify the trusted contact of the hold. Last year, a
poll showed that more than half (61 per cent) of financial
advisors in the US had seen or suspected that an elderly client
had been abused over money at least once, highlighting the need
for legislation to protect the vulnerable, particularly those
with cognitive health issues like dementia.
Cognitive decline is particularly serious because as populations
age, and the Baby Boom generation retires and transfers wealth, a
significant chunk of the population in developed nations such as
the US is vulnerable to fraudsters. Advisors need to be on alert.
In 2015, for example, research by Fidelity showed that
three-quarters of financial advisors worked with clients with
diminished mental capacity, while one in five advisors has
encountered financial abuse among their aging clients. Cerulli
Associates has also revealed (2015) that aging client bases
will create challenges for advisors, as 57 per cent of their
clients are above the age of 60 (while the summary did not
specifically cite cognitive impairment, it is fair to anticipate
that this would likely be among the list of related issues.)
There’s a lot for wealth managers to do, RBC’s O’Leary said.
“We’re very focused on our advisors leading on financial
planning…..As an industry, we are obliged to keep on top of
this,” she said.
Some diseases can be financially devastating - “it is the most
expensive diagnosis you can get in the US and many costs are not
covered” – said O’Leary. There are also care-giver costs to
consider; these issues also disproportionately affect women, who
tend to be more likely to shoulder care-giver responsibilities
and also, as women live for longer than men, more likely
statistically to suffer from cognitive decline problems. There
are also signs advisors are encouraged to look for that suggest
that a client has a problem. Such early warning signs are shown
to advisors and advisors are encouraged to be aware of
them.
“Financial confusion can be the first visible sign,” O’Leary
said. If clients repeat the same questions over and over, or
cannot grasp basic payment/number details, or there are lots of
unpaid bills and obligations, there is a problem. Advisors might
sense there is a problem if they have to ask repeatedly for basic
information.
Another red flag is if a client starts to ask for a risk
weighting on portfolios that is much higher or lower than has
been the case, she said.
Technology can help
It is sometimes feared that modern technology will make advisors
redundant, but if it takes away paperwork chores and allows
professionals to focus more on specific problems for clients,
such as cognitive decline, that is a positive.
Showing that a wealth management firm is on top of these issues
is an example of how a firm can show it is adding value to
clients over the course of their lives, she said.
Awareness about issues such as dementia also influences how
clients think about what they invest in, such as healthcare and
medical services, she said. “People are definitely giving more of
a focus to the choices they are making in their investments,”
O’Leary added.
The firm recently debuted educational materials for clients and
the advisors that serve them to help each party identify the
early warning signs of dementia, which often present themselves
in a person’s financial decision-making and behavior. It has also
issued white papers, such as the Financial Impact of
Dementia, to focus attention.
And RBC said that women have a particular reason to think
about the issue.
“It’s time to change the mind-set and prove women’s grey matter
matters, to advance an understanding of why women experience
dementia and other brain health problems differently than men,
and to develop effective treatments and a cure that meet women’s
needs,” it said.
The Buzz Aldrin case
In the UK, private client law firm Irwin Mitchell Private Wealth
warned that the mismanagement and abuse of lasting power of
attorney is on the rise following the news that Aldrin is
suing his family for mismanagement of his finances. The legend is
suing his two youngest children and his former manager following
their attempted petition to be named as his legal guardians,
citing excessive spending and associations with new friends who
intended to alienate his family. Aldrin is now suing the three in
US courts, alleging they had unlawfully taken control of his
finances and had prevented him from getting married.
Abuse of LPAs is a growing worry, the firm said. LPAs are
designed to protect those who have lost capacity by appointing a
trusted third-party to make decisions on their behalf.
“Abuse of LPAs is increasing year on year as they become more
common and sadly it’s much more prevalent than people realise.
Every week there is a new story on an elderly or vulnerable
person whose entire life savings have been drained in a matter of
months, but these reports only scratch the surface,” Kelly Greig,
partner and head of planning for later life at the firm,
said.
“There is a complete lack of understanding surrounding LPAs and
just how much power they give to a third party. They’re designed
to help people but it can easily turn the other way if specialist
help isn’t involved.”
Other lawyers have argued that while LPAs can be abused, they
remain valuable structures if safeguards are understood.