Financial advisors and wealth management firms have new resources from AARP designed to help them prepare clients for the critical risks posed by aging and cognitive decline.
The advocacy and research group for older adults launched its AARP BankSafe Initiative Dementia Hub last month, adding to its library of free training and practice management tools that the organization says have enabled financial firms to prevent fraud and exploitation that might otherwise have cost their clients hundreds of millions of dollars. Unfortunately, those savings amount to a small portion of the billions to tens of billions that research suggests older adults lose every year to financial exploitation. Disorders such as dementia, Alzheimer’s, Parkinson’s and Huntington’s may play a role in those losses.
About a third of people aged 65 or above will experience some type of cognitive decline, and, in the eight years prior to a dementia diagnosis, the median household net worth of older adults falls by more than 50%, according to research cited by AARP.
That’s why advisors and other wealth management professionals can often prove crucial to spotting red flags of cognitive decline or possible forms of elder abuse, said Jilenne Gunther, the national director of BankSafe. The tools on AARP’s Dementia Hub support advisors in broaching the difficult topics surrounding aging well in advance, while ensuring that clients take important steps like appointing and updating a trusted contact.
Advisors and other industry professionals are “more apt to see the first signs of cognitive decline. They’re uniquely positioned to act early, and, when they do that, they can prevent significant losses,” Gunther said. “It allows them to then contact that trusted family member or friend to get help.”
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Widespread planning and professional development challenges
Other studies referenced by AARP, alongside the collection of discussion guides and instructional videos available through the hub, suggest that 84% of financial professionals have worked with a client who has dementia, even though 96% said they do not feel equipped to advise those navigating cognitive decline.
While some firms have made notable investments in aging expertise, experts argue that a dearth of essential conversations about cognitive decline is extracting figurative and literal tolls on loved ones turned into caregivers overnight, on household finances affected by the cost of long-term care and, ultimately, on the assets of clients’ estates.
Many families struggling in those areas already have an advisor, according to Annalee Kruger, the co-founder of Plan For Life Now, an aging education firm for financial professionals that created the “elder planning specialist” course in collaboration with the Financial Planning Association, and the founder of Care Right, which advises clients on aging and long-term care. Those clients frequently tell her that their advisors “just talk about the stocks and markets” in their meetings, rather than addressing subjects like caregiving plans and dementia, she said.
“They’re missing the boat on this whole aging component,” Kruger said. “There really is a huge opportunity for them to better understand their now-aging book of business.”
Real or perceived legal and regulatory liability for fiduciaries’ recommendations to older clients may cause some advisors to refrain from touching on those topics, according to an AARP symposium with stakeholders and a subsequent study the organization released in January.
“Financial advisors are often well positioned to notice behavioral and financial changes that hint at the presence of cognitive issues. They may benefit from resources to help them decide when and how to encourage clients to see a doctor,” according to the report. “New research suggests that an earlier diagnosis of dementia may make a significant difference in preventing household wealth losses.”
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A business and ethical imperative
Advisors make “powerful advocates” for their clients, and they “tend to have deeper relationships as well,” Gunther said. So it’s important for them to “foster ongoing, judgment-free conversations” pairing empathy with reminders that “a court or someone else who doesn’t know what you really want” could be making important decisions on the clients’ behalf at some point, if they don’t make their wishes clear in advance, she said.
“This builds trust and reduces the stigma,” Gunther said. “We also think this is good for business. It’s not just an ethical responsibility, but it’s also good business.”
Furthermore, at a basic level, a lot of advisors “are literally shocked at how much home care costs and how much senior care costs,” because they are “woefully underbudgeting” what can amount to tens of thousands of dollars a year in medical and travel bills, Kruger said. That, in turn, puts their clients into “crisis mode” and breeds a lot of family conflicts, she said.
“Families are making all sorts of care decisions kind of willy-nilly, just because they don’t know what they don’t know,” Kruger said. “They also want to honor their parents. Usually it’s the adult kids coming to me because they are overwhelmed and burned out.”
