Looking out for clients with diminished mental capacity

As some clients age, their financial advisors might take on the added task of helping them manage diminished mental capacity, which includes memory loss and poor financial judgment. Here is how two financial professionals are working to make a meaningful difference in their clients’ lives.

Signs of a client with diminished mental capacity

Brian Heckert, managing director and senior advisor at FSM Wealth, said that in his experience, diminished capacity is a gradual progression rather than one dramatic event. One sign may be a client who was once highly organized beginning to forget appointments, repeat the same questions or struggle to understand recommendations that once were clear to them.

“I sometimes notice confusion about account balances, difficulty following a conversation or inconsistent decisions that are not aligned with the client’s long-term goals or past behavior,” Heckert said. “I have seen a range of emotions - from one or two who joke about it as they regress, to those who become combative during meetings. Sometimes their family members will call us with a heads-up about the client's changes.”

For Tom Levasseur, a founding partner at The Beacon Group, a key indicator of declining mental capacity is a client's inability to remember details of a plan developed many years ago. Additionally, these clients often forget appointments and appear “vacant” during meetings.

Working with older clients

Heckert said that when he works with clients who may be at risk of cognitive decline, he believes the most valuable planning should start early, before a significant decline occurs. If discussions begin while the client is still clearly able to express preferences and make decisions, it's much easier to put safeguards in place to preserve both their dignity and financial stability. “We always try to add ‘trusted contacts’ when establishing accounts for clients aged 50 and older,” he said. “They usually appreciate the recommendation and add the contact early.”

To help clients recognize the importance of having a trusted contact, Heckert shares real examples of clients who have fallen victim to scams. He illustrates how having a trusted contact could have potentially prevented them from experiencing financial losses. He emphasizes that a trusted contact is needed by clients of all ages, not just older individuals.

Heckert’s firm also addresses health events such as dementia early in the planning process and establishes a continuity framework. This may include identifying the trusted contact, coordinating with legal counsel about powers of attorney or estate planning documents and clarifying who should be involved if concerns arise in the future.

“These are not always easy conversations, but when framed appropriately, they are often welcomed as part of long-term planning rather than as a reaction to incapacity,” he said.

Implementing these strategies

What are some of Heckert’s approaches to implement these strategies? “From a practical standpoint, our planning process aims to simplify the client’s financial life, no matter their age,” he said.

Complexity can become a major risk factor as cognitive ability declines. A household with multiple investment accounts, scattered banking relationships, irregular income flows and fragmented documentation may be manageable for a healthy client, but it can become unworkable when memory, judgment, or attention begin to deteriorate, he added.

“If one spouse handles all things financially, our process helps educate the other spouse and prepare openly for the cognitive decline of either spouse,” he said.

With client approval, Heckert said that the plan serves as a single place of reference, with all client data shared remotely when the client believes their children need to know more about their financial life. Technology allows scattered families to attend meetings, no matter their location, he said.

Heckert said that his firm’s average client is in their late 60s. “We have seen a range of clients from 90-year-olds at the top of their game, as well as planning for a long-term care stay for a 59-year-old,” he said. “Our role as an advisor is to address all risks, and cognitive decline is included.”

In sharing some of the approaches they use in working with his clients, Levasseur said that from the outset of the client relationship, he and the client talk about the importance of having a proper legal structure for their assets, and ultimately their legacy.

“From a basic will to the powers of attorney and sometimes revocable trusts, the spectrum of legal ‘shields’ can save a lot of heartache and aggravation down the road,” Levasseur said. “This leads to a discussion about who in their lives they would trust with their affairs, so when they age, it becomes an easier conversation with people in their lives that we’ve spoken to and have a relationship with, or even already have a professional client relationship with their ‘trusted family member.’”

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