Most people will, at some point in their lives, experience some degree of cognitive decline—the diminishing ability of the brain to perform tasks related to memory, decision-making, or thought-processing—whether it is triggered by a health event or simply the natural process of aging. Any degree of cognitive impairment has the potential to impact financial decision-making.
Broaching the topic of aging can be difficult for investors and advisors alike. But health and financial wellness are intertwined–so addressing the risks early and building a plan before it's needed can help empower everyone, simply by planning ahead.
Investors with a plan in place should their decision-making abilities become diminished 1
Investors who say they have talked with their family about possible cognitive decline 1
Investors who have spoken with their financial advisor about aging 1
This research report takes a comprehensive look at the connection between money mistakes and cognitive decline, and provides a set of proactive measures that advisors can use to help protect their clients. And with more than 60% of clients still in need of a plan, it’s time to start the conversation.
Conversations around aging typically focus on retirement income planning and investment risk, but don’t include a plan to manage the financial risks associated with a decline in cognitive health. Ideally, financial goals, personal preferences and estate plans should be prepared and shared long before cognitive decline impacts financial decision-making.
To help you foster an open and respectful dialogue, we created a set of hypothetical conversations to encourage clients to engage in the planning process.
A comprehensive checklist of financial and legal items is a critical tool to help protect and prepare clients for the risks associated with cognitive decline. Make sure you consider:
Goal Setting in the context of their personal situation
Estate Planning including asset transfer and gifting strategies
Budgeting to properly manage cash flow
Tax Planning for when Social Security, pension benefits, 401(k) payouts or IRA income is received
Insurance Planning including long-term care or life insurance
Health Care Planning such as special assistance beyond what insurance might cover
Contingency Planning for long-term care or end-of-life planning
Managing Wealth Transfers Across Generations
When creating an action plan with your client, don’t forget to reserve time to discuss wealth transfer plans with the whole family. Advisors can help to both structure the plan and begin building a relationship with the next generation.
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