Cognitive decline: The one risk you can’t afford not to hedge

Brie P. Williams, Head of Practice Management, State Street Global Advisors

Age has a way of sneaking up on all of us, including our clients. Life experiences may make us wiser, but they don’t protect us from the natural decline of cognitive capabilities as we age.

A proactive contingency plan can help protect clients from potential financial risks associated with a decline in cognitive health.

There are financial risks from a client's decline in cognitive health

Proactive, positive and practical

Client conversations about aging often focus primarily on retirement income planning, overlooking the need to manage potential financial risks related to a decline in cognitive health. Advisors and clients may be hesitant to broach the subject, but ignorance is never bliss. Failing to put a plan in place leaves the client, their family, and your practice at greater risk.

Many people continue to handle their finances well into their later years, but we can all expect at least some challenges as we age. The hidden danger is that, while decision-making erodes, confidence levels can actually increase.

Advisors who are mindful of the challenges investors face as they age can apply a strength-based approach to starting the conversation, building on the client’s own experience, wisdom, and family support.

Taking a proactive, positive and practical approach can ease the conversation for both the client and the advisor. Clearly understand privacy laws and encourage clients to prepare documentation that outlines their plan to address potential cognitive impairment. Informed consent is an essential part of the planning relationship.

An inclusive approach

Approach the conversation with open and respectful dialogue, but also with intent. While it can be an uncomfortable topic to broach, advisors are often well placed to handle these conversations because they can be more objective than a family member might be.

An action plan for every client

None of us are invincible, nor should we be overwhelmed by fear of the unknown. And while everyone hopes that the statistics will not apply to their personal situation, hope is neither a plan nor a strategy. Advisors who guide their clients to proactively manage the potential risks of cognitive decline are helping them maintain control and achieve peace of mind.

A comprehensive checklist of financial and legal items is a critical tool to help protect clients from risks associated with cognitive decline.

For more information about protecting clients from the risks related to cognitive decline, including additional hypothetical examples based on practice techniques and two modes of communication, read our conversation starters guide: Contingency Planning to Help Clients Avoid Age-Related Financial Risks.

For more, please read the rest of the post originally published on the SPDR Blog on June 24.

Photo Credit: Fredrik Rubensson via Flickr Creative Commons

This material is from State Street Global Advisors and is being posted with State Street Global Advisors’ permission. The views expressed in this material are solely those of the author and/or State Street Global Advisors and Interactive Advisors is not endorsing or recommending any investment or trading discussed in the material. The opinions expressed may differ from those with different investment philosophies. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed or relied on as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, strategies, tax status, investment horizon, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.