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Protecting Clients with Cognitive Decline: A Guide for Financial Advisors

Protecting Clients with Cognitive Decline: A Guide for Financial Advisors

Financial advisors face a growing challenge as an increasing number of older clients experience cognitive decline, particularly Alzheimer’s disease and other forms of dementia. A recent study from the New York Federal Reserve Bank highlights that credit scores can decline and delinquencies can rise long before an official diagnosis, sometimes up to five years prior. This means advisors must be proactive in identifying signs of diminished capacity to prevent financial damage. Steps include drafting a diminished capacity letter, maintaining regular communication with clients and their trusted contacts, monitoring behavioral changes, and potentially organizing family meetings to discuss financial decision-making roles. Advisors are encouraged to seek training resources to better understand how to manage clients with cognitive decline. Being proactive not only protects clients but also mitigates potential legal liabilities for advisors. By taking these steps, advisors can ensure they are safeguarding their clients' financial futures while navigating the complexities of cognitive decline.

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