When Tanya Butler first meets with an elderly client, she often takes off her wristwatch before entering the boardroom.
“I’ll say, ‘Oh, I don’t have my watch with me. Could you tell me the time?'”
It’s one way for Butler, an estates and trusts lawyer with Cox & Palmer in Halifax, to assess whether her client is showing signs of cognitive decline.
Cognitive impairment (CI) — from mild confusion or forgetfulness to more serious conditions like dementia or Alzheimer’s — is a sad fact of aging. And as Canadian demographics skew older, it’s taking an increasing toll. The Alzheimer Society of Canada, for example, estimates that 564,000 Canadians currently live with dementia, a number that is expected to rise to 937,000 within 15 years.i The annual cost to Canadians of caring for those with dementia is estimated at $10.4 billion.ii
For financial and legal advisors, CI presents its own specific challenges. As cognitive abilities decline, financial and decision-making skills are often the first to suffer (see “Early signs of financial decline in the elderly,” below). That leaves advisors like Butler in the unenviable position of trying to determine whether their clients have the capacity to make financial and legal decisions.
Fortunately, however, aging is not a surefire path toward declining financial ability. “A lot of older adults have a pretty sophisticated knowledge about their financial situation, acquired over a lifetime of experience and accumulated knowledge,” says Dr. Kelly Murphy, a psychologist and the cofounder of Toronto Brain Health. This type of so-called “semantic” memory, she explains, is a bit more resilient than other types of knowledge to the passing of years.
One study, for example, shows that adults make their most effective financial decisions in middle age, with age 53 being the “sweet spot.” By about age 70, though, that semantic memory tends to plateau, and financial vulnerability increases.
With that knowledge in mind, advisors who have the luxury of long-term relationships with clients can aim to lock down the major points of an estate plan — creating a will, naming an executor, creating powers of attorney for financial and personal care — well before the likelihood of CI becomes a reality. Some clients may choose to simplify a complex portfolio in their late 50s or early 60s. There are no hard and fast rules, though, says Murphy, who points out that senior Canadians are a very diverse group. One 70-year-old may not want the headache of monitoring a full portfolio of stocks, while another may find it an invigorating hobby that keeps her engaged and learning.
Any strategy, though, is best considered before it’s needed. Too often, says Butler, people don’t think about CI until they get a diagnosis of Alzheimer’s and come in with already diminished capacity. She’s developed a variety of red flags to watch for CI.
If a client’s son or daughter wants to come into the meeting or resists leaving, answers for their parent, or if the parent looks to the child for answers, that can be a sign of diminished capacity or undue influence, she says. She’ll ask the child to step out for at least a portion of the meeting, explaining that she needs to take her instructions from the parent and can’t otherwise create a valid will.
On her own with a client, Butler will use small talk as fact-finding. She’ll ask questions about children and grandchildren, a client’s address, age and birthday. “If they can’t remember how many grandchildren or great-grandchildren they have, or their names, that’s a red flag. So is an inability to clearly answer questions about who might expect to inherit from them and what assets they have.” These conversations, she says, take longer than they typically would with a younger person. “The longer you talk, the harder it is for them to fly under the radar.”
Butler also makes sure to ask whether a client is on medication, about their general health, and about any problems with vision or hearing. It’s very easy, she points out, to mistake difficulty seeing or hearing for cognitive decline.
Mild cognitive impairment, says Murphy, doesn’t necessarily mean that a person is incapable of handling their financial legal affairs.
Many retirees, she says, will need a bit more time to process financial information or make financial decisions: what used to be accomplished over one meeting now might take two. They may need to have complex information synthesized or read out loud to them. Research shows that many seniors are at their cognitive best in the morning, says Murphy. If offered the option, they may choose to schedule appointments first thing in the day. Many advisors will ask clients — ideally well before any signs of CI are present — to identify a trusted support person or two who can be copied on documents and attend meetings.
With the right support in place, Murphy says, a person with diminished capacity can still make many financial decisions.
[custom-html id=50] [custom-html id=75]
Want to help your clients find ways to stave off or slow down cognitive impairment? Let them know that the best way is to stay healthy overall. Encourage your clients to exercise, eat well, not smoke (the risk of developing dementia is 45% greater for smokersiii), limit alcohol and get enough sleep. Keep the brain active through reading, challenges like puzzles and crosswords, and learning new things. And encourage clients to stay social: see friends and family, join a class or book club, or volunteer. “Lots of research shows definitively that these kinds of changes can slow down the symptoms of cognitive impairment,” says Dr. Kelly Murphy, a clinical psychologist and specialist in the field of cognitive aging and memory intervention.
Early signs of financial decline in the elderly
The U.S.-based National Endowment for Financial Education has compiled a checklist of some early warning signs of cognitive financial decline in elderly people. These changes in financial behaviour include:
- Taking longer to complete everyday financial tasks, like preparing bills for mailing, or filling out a cheque register
- Showing reduced visual attention to key details in financial documents. For example, being unable to identify a bill that is overdue or needs prompt attention, or having trouble identifying transactions and complex documents like bank statements
- Showing declines in everyday arithmetic skills, like calculating a medical deductible or the return on an investment option
- Showing decreased understanding of financial concepts. For example, difficulty understanding terms on a bank statement like “interest rate” or “minimum balance”
- Difficulty identifying key risks in an investment opportunity or overemphasizing investment returns while overlooking risks