Tip of the Week

Planning Tools for Addressing Clients’ Diminished Capacity

Financial advisors can play a key role in helping their clients who may be facing diminished capacity. There are various tools to mitigate the risks associated with cognitive decline and help a client deal with the financial consequences of diminished capacity.

There are legal documents such as POAs and trusts, tools an advisor can use for notification and disclosure, planning solutions such as retirement income flooring, and product strategies such as automatic rebalancing. These tools can help simplify the management of wealth, offer support if the client loses the ability to handle financial matters, and avoid elder abuse. A financial advisor can assist the client in sorting through these options and create a process for addressing the very real risk of diminished capacity.

A general methodology for the financial advisor to follow might be as follows:

  1. Discuss the Risk
  2. Identify the Key Issues
  3. Create an Overall Strategy
  4. Work with the Advisory Team
  5. Monitor the Situation

With increased life expectancies comes the increased risk of diminished capacity. Financial advisors can play a key role in helping their clients face these perils and utilize mitigating tools to combat the risks associated with diminished capacity.