Financial Advisers Face Growing Risks from Aging Population


As the population ages and investors’ financial acumen decline, financial advisers will be forced to assume additional duties and responsibilities in order to avoid liability exposure. For example, Alzheimer’s disease will raise legal and ethical challenges for investment advisers over the next 40 years as the incidence of that dread disease is expected to nearly triple from 5 million to 13.8 million. Alzheimer’s typically impairs memory and judgment, as well as high-level mental functioning required to handle financial matters.

Only 13% of those 65 and older have Alzheimer’s, but almost 50% of those 85 and older are afflicted.  A huge population of baby boomers is beginning to enter the higher-risk years.  It follows that Alzheimer’s and other forms of dementia present practical, legal and ethical challenges, as well as significant risk, to investment advisers (“Alzheimer’s presents risks to your practice,” by Mary Beth Franklin, InvestmentNews).

Ms. Franklin points out that contingency planning for mental impairment is not the same as dealing with it in real time.  Most advisers know how to plan for a crisis, but few know how to plan in the midst of a crisis.  The expenses for long-term care are among the most difficult and expensive problems that people look to investment advisers for help in solving.

Financial advisers would be well-advised to assemble a team of people who can be consulted about various issues that may come up. Such a team may include an elder care and estate planning attorney, a geriatric psychiatrist, and a geriatric social worker.   Given the prevalence of elder financial fraud, the team should probably also include an attorney experienced in dealing with elder financial fraud as well.

Ms. Franklin recommends that advisers develop a written policy for dealing with clients with diminished mental capacity. Such a plan may include, among other things:

•    Having an experienced elder care attorney create or review of the client’s estate, will and trust documents.

•    Having the client evaluated by a geriatric psychiatrist.

•    Having the client’s investments reviewed by a competent and independent third party.

Ms. Franklin’s recommended reading includes a booklet called “A Financial Professional’s Guide to Working with Older Clients,” by the Financial Planning Association and AARP.

Page Perry is an Atlanta-based law firm with over 150 years of collective experience maintaining integrity in the investment markets and protecting investor rights.