Advisors might not delight in the prospect of talking with aging clients about end-of-life issues, but having those conversations, hard as they are, is in the best interest of the clients, their family and even the advisory practice.
So argues Carolyn Rosenblatt, co-founder of AgingInvestor.com, an education and training firm formed to help the financial community better understand and meet the needs of an aging population.
"People in financial services just don't seem to know very much about aging," says Rosenblatt, a registered nurse and lawyer.
FORGE FAMILY TIES
Rosenblatt and her fellow co-founder, husband Mikol Davis, a psychologist, argue that advisors need to forge ties with elderly clients' relatives, but too often fail to do so. By shying away from discussions about estate planning and who will become involved if clients begin to lose their faculties, advisors create the prospect that their clients' wealth will pass out of the family.
"What they're also avoiding is dealing with having relationships with their clients' heirs," Davis says. "They're missing a very vital opportunity to deal with this potential intergenerational transfer of wealth."
Rosenblatt cites a variety of factors that can help explain the reluctance on the part of some older clients to address issues around estate planning, including the kneejerk resistance that comes "because they don't want to face getting old or dying."
She also points out that many older investors tend to be "very secretive about money," and, as a result, might be disinclined to discuss their financial situation with their adult children. "That's the lesson that came out of the Great Depression," she says.
But longer life expectancies have come with rising rates of cognitive impairment, which can leave elderly investors vulnerable to financial scams that can decimate a client's wealth. So preparing for that contingency, which should involve a plan for how to intervene when a client begins to show signs of diminished mental capacity, becomes paramount, she argues.
"Of course there are clients who are going to resist, and you have to do the best you can. And I don't believe that advisors are doing the best they can," Rosenblatt says. "We have to address the real possibility that you, at some point while I am your advisor, could lose the ability to make sage financial decisions."
She argues that advisors, as a class, generally do a poor job of evaluating their clients' capacity, and recommends that they develop a senior-specific program to guide their interactions with elderly investors. That program would include guidance on regulatory compliance, staff training and, potentially, when to engage an outside expert to help evaluate a client's cognitive condition.
"I think there's a broad lack of awareness about what financial capacity is," Rosenblatt says. "Everybody needs to understand that financial capacity does not mean you are perfectly competent in every way as long as you can carry on a conversation. That is the myth that prevails."
Rosenblatt and Davis suggest that advisors might frame their discussions with older clients in terms of staying out of a nursing home or not becoming a burden to their children, both scenarios seniors are keen to avoid.
Aside from offering clients peace of mind and a sound financial plan for their later years, bringing their adult children into those conversations can have the added benefit for the advisor of keeping the family wealth managed within the practice.
"Where I think that it will definitely create a continued value-add as the advisor is by being the one that is championing the discussion with their heirs, and their heirs seeing you're truly concerned about my dad," Davis says. "That creates a level of trust for me if I'm the adult child."
Kenneth Corbin is a Financial Planning contributing writer in Washington and Boston.
This story is part of a 30-day series on better serving seniors.