Planning Can Ease the Burden of Declining Capacity 

Sometimes you gotta look hard for the upside. 

There’s nothing easy about recognizing a client’s early signs of a cognitive disease, but it’s an opportunity to make a big difference. In fact, research has shown that uncharacteristic financial mistakes like missed credit card payments or questionable investment decisions are potential indicators of a future dementia diagnosis. That puts trusted wealth management professionals in pole position to help their clients recognize and plan for declining capacity — ideally well before any serious symptoms show up. 

“This is the hardest work we have to do as financial advisors, but also the most meaningful,” said Marguerita Cheng, CEO of Blue Ocean Global Wealth. “You can’t rush these conversations, and you have to approach them with empathy and sensitivity.” 

Doing the Work 

Cheng has both personal and professional experience navigating these difficult waters, and she’s derived a few strategies for broaching what can be a very sensitive subject. 

“One trick is to tie this type of planning to more positive life events rather than waiting for a problem to show up,” she said. “In my own case, I was able to use the birth of my second child as a natural moment to help my parents recognize the importance of updating their estate plan and making decisions about things like long-term care.” 

The broader industry is catching on, Cheng said, evidenced by the CFP Board’s newly published guide on the topic. The publication is meant to help advisors navigate a challenging mix of issues, including confidentiality questions, the potential for exploitation, establishing trusted contacts and more, said Brian Wong, assistant general counsel at CFP Board. 

“You can boil it down to two primary goals. First is establishing trusted contacts and getting permission from the client to discuss their cognitive health,” Wong said. “Then it’s about putting an appropriate estate plan in place, including things like establishing a durable financial power of attorney.” 

Other sections cover when advisors should take protective actions, including their obligations to report suspected abuse or exploitation. 

Don’t Be Late. “If the first time you talk about who should be involved in financial decisions is after you notice a change in a client’s behavior, the conversation is already too late,” said Ranie Verby, director of practice management at Plancorp. The best approach is to frame planning for capacity and caregiving as a standard component of financial planning, she said. “We routinely plan for events we hope never happen, and diminished capacity is no different,” she said. “The further in advance we plan, the more clarity we can provide.”