What advisers need to know about dementia
The ageing population has many implications for financial advisers – more than the growing numbers either transitioning to or already in retirement. There is also the matter of dementia.
The law allows an adviser to assume a person’s decision-making ability, but the law, like financial services, is complex. With either discipline, a wrong action can have painful implications for client and/or practitioner.
In a session at this week’s annual ‘Technical Summit’ produced by the SMSF Association (July 28) clinical neuropsychologist Dr Jane Lonie and lawyer Michael Perkins (pictured above) outlined the adviser’s responsibilities and presented their own tips and advice for dealing with what is likely to become the increasingly challenging problem of cognitive impairment.
For starters, advisers should be aware of some of the broad findings about the prevalence of dementia, as the most common cause of cognitive impairment. For instance, they should know that about one in ten of every person over 60 has dementia, the most common form of which is Alzheimer’s Disease. Its onset is not sudden; that’s one of the problems. And related to that, it can take 20 years for the first signs to appear and, even then, is not always diagnosed.
Exacerbating the problem for financial advisers, who must be on the lookout for “triggers” which may suggest an inability for the client to give “informed consent,” as required, is the hierarchy of cognitive function in a legal capacity.
Dr Lonie, who is often called as an expert witness in cases relating to client competency, says the first cognitive function to suffer is usually insight. However, remembering and communicating are among the last. This makes it more difficult for advisers to satisfy themselves of their client’s ability to understand something as complex as a financial plan.
She told the Summit that in the majority of court hearings in which she was involved, the service provider in question had failed to recognise the client’s loss of cognitive abilities.
Lonie and Perkins are the founders of Autonomy First in Sydney, which provides both legal and psychological services including education, reporting and support designed to help the autonomy of individuals.
She said that advisers should think about what they are hearing from the client – bearing in mind that more than 50 per cent of SMSF members are over 60 – and whether this provides evidence the person may or may not be an autonomous decision maker.
She played two audio recordings of actual conversations between the service provider and clients, who were both male. The first one was asked whether he lived with family and replied “mum’, ‘at home’, in ‘Doonside’ (in Sydney’s west). The second was asked whether he had an enduring guardian. He replied ‘yes’ but couldn’t answer who the guardian was. He said he would need to look it up in his files “under ‘G’.”
Lonie observed that both men “appeared normal”. But the first one was in his 50s and had an alcohol dependency which meant that he could not remember anything past about five minutes. His mother had actually passed away some time ago. The second one had appointed one of his relatives as his enduring guardian only the week before.
“We can’t rely on cognitive impairment being detected,” she said. “We need to think beyond the financial practicalities and think about the wider family context. Often, the person will lose the ability to appraise family members and the family dynamics.”
She said the ability to express preferences and make choices was not the same as having the capacity to give informed consent. Perkins said that there were many triggers for the assessment of capacity. “And the legal impact of a trigger is that your protection of assumption about the person is removed… In my experience, insight goes first but language and sociability last the longest.”
Perkins said that the adviser should try to understand the “will and preference” of the client first and to become versed with the use of “open questions” in interviews.
Beware if a support person says: “Don’t talk to him/her, I have a power of attorney.” Similarly, beware of the client says: “I don’t know. What would you do in my situation?”
The existence of a power of attorney did not absolve the adviser from establishing the will and preference of the client, Perkins said.
Lonie warned that to answer the question “what would you do?” advisers were putting themselves in the position of a “substitute decision maker”.