Mary is a 53-year-old business executive who calls her aging father, 85, every Sunday. Over time, Mary notices that their phone calls are becoming increasingly difficult. She starts to speak louder and more slowly, responds to the same questions several times, and even has to remind her dad that it is Sunday, the same day she calls every week.
During a visit with her father, Mary notices a dent in his car, a huge stack of unopened bills, a burned pot on the stove, and very little food in the refrigerator. At that moment it becomes clear to Mary that her dad is beginning to struggle with living independently. Despite his insistence that he is fine, the evidence, which is increasingly concerning, suggests otherwise.
In her quarterly meeting with the family’s financial adviser, Steven, Mary mentions some of her concerns. Steven reluctantly admits that he started noticing a change in a conversation with her father last year. According to Steven, Mary’s dad began asking the same questions several times during their meetings, and would call him later in the week to follow-up about information they had already discussed.
From there, things got worse. Transactions that were once clear to Mary’s father, were now confusing and uncertain; decisions that were once seamless and strategic were now haphazard and misguided. Steven expresses to Mary that he has concerns that her father is experiencing hearing loss or maybe signs of dementia or Alzheimer’s, though acknowledges he is not an expert in these areas.
The alarm bells go off loudly for Mary. Why hadn’t Steven, who had always been forward-thinking about the family’s investment planning and portfolio management, been more proactive in sharing his concerns about her father? While cognitive decline is a fragile subject, Mary would have appreciated more guidance from the family’s financial adviser. And, though she was not necessarily asking Steven to diagnose her father, surely the firm had someone in their referral network to help the family with this type of concerning situation, especially as it affected the family portfolio.
After enjoying a multigenerational relationship with Mary’s father and his family, Steven was now at risk of losing Mary and her family. He knew that he should have been more proactive in flagging the signs of cognitive decline, but felt unsure of how to address it and help the family plan for the inevitable decline.
Advisers and eldercare
If that story seems familiar to you, you’re not alone. Bridging a multigenerational familial gap by trying to meet the disparate needs, desires, and expectations of a client and his or her family is an age-old challenge for financial advisers. But the solution to building a cross-generational pipeline lies not in providing optimal returns (though, of course, that’s crucial) but also in helping proactively navigate the challenges of dementia and eldercare before it becomes a crisis.
Financial advice is, at its heart, about valuing a long-term over a short-term approach. Advisers aim not only to provide the best portfolio management; they want to position their clients for enduring financial success and comfort, from the beginning of their relationship through retirement. But the relationship should ideally continue beyond that. Advisers and their firms aspire to develop meaningful relationships with clients in tandem with their strong performance in order to maintain the client and his/her family even after their passing.
However, they’re frequently unsuccessful. A recent State Street analysis found that only 29% of children continue working with their family financial adviser after their parents die.
Surely, advisers experience some natural attrition anytime there’s relationship turnover. But there is an opportunity to create a stronger multigenerational approach to portfolio management by helping clients anticipate the unexpected — not only with their investments, but also with the inevitable aging process. This is a highly vulnerable time for families, and advisers must demonstrate even greater value by being on the forefront of cognitive decline or other long-term health care needs.
Americans are living longer and many in more comfort and better health than ever before due to medical advances and improved health care. However, there is one symptom of aging that is posing growing risk: diminished capacity. Cognitive decline — especially in the form of Alzheimer’s and dementia — is growing increasingly common. A recent study projected that the incidence of dementia or other cognitive impairment will affect 15 million Americans by 2060 — up from 6.08 million in 2017. Moreover, even before any projected changes, roughly half of people over 85 years old suffer from dementia.
Financial advisers, through their sustained and intimate relationship with their clients, are on the front lines of their clients’ cognitive decline, often noticing telltale symptoms 10 years before a physician diagnosis. These may manifest in an increase in communication, erratic behavior, and/or changes in temperament.
And yet, despite the frequency with which these issues impact people across the country and the unique window into the issue advisers have, they remain ill-equipped to address it. In fact, a recent State Street study found that 96% of advisers feel unprepared to assist clients with Alzheimer’s disease.
Investors aren’t much better prepared to prepare for the inevitability of eldercare and its associated costs — only 39% of investors have a suitable plan in place should their financial decision-making diminish.
The overwhelming financial and emotional costs of eldercare
Unfortunately, financial and emotional eldercare expenses — especially when clients are unprepared — can be overwhelming. Though aging-in-place — many people’s preferred plan — offers people the ability to age in the comfort of their own home, home health care costs are nearly $50,000 a year on average, without accounting for any home renovations or modifications that may be required. And if more extensive care is required in a memory care or long-term care facility, costs can be closer to $100,000 a year. With increased longevity, these are often multiyear treatment plans.
These ongoing costs do not even include any health care treatment or recovery costs, which often require significant additional funds.
Beyond paying for treatment, family members often have to expend one day a week coordinating and navigating the opaque and fragmented eldercare process, potentially putting in jeopardy their own career and growth opportunities.
Emotionally, clients encounter deep sadness and despair in caring for their declining spouse or parents, watching their once lively and engaging loved one drift away from them. The process is often slow and painstaking making the experience even more acutely painful to behold. Indeed, according to the Anxiety and Depression Association of America, 40% to 70% of caregivers show symptoms of depression.
Compounding the costs is the burden of navigating the fragmented eldercare process. With limited, if any, communication and coordination across physicians and caregivers, difficult reimbursement processes, and expensive procedures, simply taking care of bills and policies can be overwhelming.
On top of that, many long-term care providers misrepresent their services and are incentivized to fill beds at any cost — even to the detriment of patients and clients. So simply deciding on where aging family members should receive care — to say nothing of what care they’ll need, how frequently, from whom, and who is paying for it — is challenging as well.
With that in mind, navigating the eldercare process can be financially and emotionally debilitating. The all-consuming coordination and the overwhelming cost can leave clients and their advisers in a complicated position.
What should a trusted adviser do when they notice signs of decline?
While no one wants to initiate a difficult topic, but advance planning and early conversations are especially important for people with dementia because the gradual loss in cognitive performance complicates decision-making over time. An adviser who notices warning signs when meeting with clients should consider the following:
1. Reach out to the next generation in line for succession, executors and/or the designated emergency contact to discuss the matter and any of their concerns. Are they too noticing changes in behavior?
2. Invite additional family members to client and business meetings and document any relevant discussions. These can be important to protect families against any risk of financial abuse.
3. Recommend families contact a doctor for a proper diagnosis. Early diagnosis is critical and can improve brain function, reduce symptoms and slow down the rate of decline.
4. Partner with a third-party subject matter experts to help start a difficult conversation, offer necessary services, resources and support.
5. Proactively plan and document a family’s care wishes while the older adult can still make sound decisions.
Eldercare: A business imperative
Throughout the life cycle of an adviser-client relationship, advisers are seeking out ways to anticipate their clients’ needs, counseling them early on how they can, for example, begin saving for college tuition or financing their retirement. They do so because they know that the better they anticipate their clients’ needs and help them achieve their financial goals, the better their relationship will be over the long-term.
Though it’s often easier to ignore symptoms of aging, eldercare too must be among the issues advisers proactively seek to address with their clients. As the cost of acquisition for a new client continues to rise, it’s a business imperative for advisers to ensure a multigenerational pipeline of clients. Helping clients and their families anticipate eldercare costs, prepare for them, and execute a pre-existing plan for aging positions advisers to maintain relationships with an entire family — even as their client ages and ultimately passes on.
Considering how common cognitive decline is, it’s essential for advisers to counsel their clients on taking critical steps — like collecting all necessary medical documents and evaluating how and where they would want to age and what to do should the client become incapacitated. Doing so helps dramatically lessen the cost of care in case of an emergency, simplify the caregiving process should Alzheimer’s, dementia, or other decline present itself, and, importantly, solidify the adviser-family relationship.
Ultimately, sustaining and building upon an existing client relationship by further developing trust and confidence through eldercare planning presents a tremendous opportunity to solidify a relationship with multiple generations of the client families. Advisers should not avoid having the conversation until crisis hits, rather initiate these discussions proactively, or reach out to a third-party eldercare expert to assist in the most productive way to allow the family to plan in advance.
Joanna Gordon Martin is the founder and chief executive of Theia Senior Solutions, an integrated eldercare platform and consulting firm that helps advisers and families navigate the complexities of dementia and eldercare.